Foreign Policy: White Papers

Lord Wallace of Saltaire: asked Her Majesty's Government:
	Whether they consider that a White Paper on foreign policy would offer a contribution to public understanding and debate comparable to that provided by the recent White Paper on international development, Eliminating World Poverty: Making Globalisation Work for the Poor.

Baroness Scotland of Asthal: My Lords, the Government attach great importance to promoting public understanding and debate of foreign policy. The Foreign and Commonwealth Office sees great value in White Papers on specific issues and has produced its own White Papers on human rights and on the Overseas Territories, and worked extensively on the Department for International Development's White Paper on eliminating world poverty. Through the Foreign Office website, the annual departmental report and the human rights report, we give an up-to-date and comprehensive account of our foreign policy achievements and objectives.

Lord Wallace of Saltaire: My Lords, I thank the Minister for that response. I have read the Foreign Office annual report and much admired the photographs of the noble Baroness on pages 37, 75 and 120. It is, however, an annual report. Is she aware that when I asked the Printed Paper Office whether I might have the annual report of the Foreign and Commonwealth Office, it took the office several minutes to discover whether there was one and then to find a copy? It is not the best known document. Has she been briefed that in a speech in April 1974 the Labour Foreign Secretary, now the noble Lord, Lord Callaghan, proposed that there should be an annual foreign policy White Paper? The noble Lord has sent me a nice note apologising for the fact that he is unable to be present today to comment on the Question. Does she not agree that a foreign policy White Paper setting out in broad terms the objectives and aims of British foreign policy would serve as a much better basis for informed public debate than what is currently available?

Baroness Scotland of Asthal: My Lords, I cannot, most unusually, agree with the noble Lord in this instance, although I am most grateful for his flattering comments about my photographs. However, those noble Lords who see the report will soon know that those comments are unjustified. The Government have tried to focus on ensuring that the greatest degree of information is made available in the public domain. Noble Lords will know that the website is a successful means of communication and that the annual report has been very useful. The White Papers have been contributed to by a number of different departments. In our view, there is comprehensive information in the public domain.

Lord Howell of Guildford: My Lords, I welcome back the noble Baroness from her mission to the antarctic. Nothing much has happened here since she has been away! I agree that to put the whole of our foreign policy, which nowadays is interwoven with domestic policy, into one White Paper would be a Herculean task and might produce a very fat volume.
	However, can we at least be a little clearer, whether in a White Paper or elsewhere, about our policy in relation to the United States, which I know is at the top of the Foreign Office agenda? Will we really be able to meet the growing American worries about the European Rapid Reaction Force, expressed very forcefully yesterday by Secretary of State Rumsfeld, or will we continue with the faintly anti-American line pursued on this issue by the French and to some extent the Germans? Will we support the Americans on national missile defence, which is now getting to the point where we must say clearly to them that we are on their side and that we will make facilities at Fylingdales and Menwith Hill fully available for the development of what will, in the long term, be a very valuable asset for world peace?

Baroness Scotland of Asthal: My Lords, I thank the noble Lord for noticing my safe return. Perhaps I may reassure him that our policy in relation to America is well known and understood by our partners. The Americans are our closest allies. We have worked with them through centuries, not just years. In relation to NMD and other matters, those issues are the subject of constant conversation between ourselves and the Americans, and that will continue.

Baroness Williams of Crosby: My Lords, in saying how pleased we are to see the Minister back with us, perhaps I may press her just a little further. It would be helpful if the objectives of this country's foreign policy on at least three matters could be made clear in a White Paper or a report. First, would it not be useful to have a more detailed statement on the Foreign Office's attitude towards peacemaking and peacekeeping forces and the role of Europe within that? Secondly, would it not be reasonable to make it very clear that there are no grounds for fearing the European strategic defence initiative because it is fully, in the view of the Government, within the framework of NATO? Finally, with regard to national missile defence, will the noble Baroness keep strongly to the line that she has so far adhered to in this Chamber; namely, that national missile defence must be seen in the wider context of the whole of arms control, disarmament and the pursuit of a secure peace in the world, which means that it would be most unwise at the moment to jump one way or the other definitively?

Baroness Scotland of Asthal: My Lords, the Government have always been prepared to consider having a White Paper in relation to specific issues when the need arises. That was demonstrated by, for instance, the White Paper on the Overseas Territories. So we shall certainly continue to look at that point. The noble Baroness is right to say in relation to NMD that the Americans have not themselves decided which way they wish to fashion their policy. We very much appreciated the comments made by Colin Powell, who also emphasised that he intended to make sure that consideration is given to other views--from the EU, Russia and China. All those thoughts, from a new administration, are comforting and should be welcomed. We will give proper consideration to any request made by our American colleagues once they have fashioned what they themselves would like to do. At the moment, they do not know; and it would be quite improper for us to seek to comment until they do.

Lord Chalfont: My Lords, does the noble Baroness agree that it might be advisable to return to the Question on the Order Paper, much as I would like to follow both the noble Lord, Lord Howell, and the noble Baroness, Lady Williams, down the labyrinthine way of the strategic defence initiative? Does she further agree that the publication of a White Paper on defence, which was I believe the subject of the original Question, would be extremely valuable?

Noble Lords: Foreign policy.

Lord Chalfont: My Lords, I am sorry, I meant to say that the publication of a White Paper on foreign policy would be a wise move. The noble Lord pointed out that it is possible to find out a great deal on defence matters, with which noble Lords can then agree or disagree. However, does the Minister agree that foreign policy is another matter and that a White Paper on it would be extremely valuable?

Baroness Scotland of Asthal: My Lords, we agree that White Papers can be valuable in relation to certain specific points. However, I should say again that the FCO is committed to openness and diversity. From day one, with the Foreign Secretary's press launch of his FCO objectives and the FCO open days, this Government have made enormous progress in this endeavour. We are trying to find as many vehicles as we can to encourage full discussion, openness and transparency. That will continue and we believe it to be the best way forward.

Defence Evaluation and Research Agency

Lord Burnham: asked Her Majesty's Government:
	What are the financial and other implications of the delay, until 1st July, of the break-up of the Defence Evaluation and Research Agency (DERA).

Lord Burlison: My Lords, on 24th July 2000, we announced the public/private partnership model for the Defence Evaluation and Research Agency. Around three-quarters of the current organisation will become a company. For strategic reasons, the remainder will be retained within the Ministry of Defence.
	Operational separation is envisaged by 1st April 2001. Legal separation will follow on 1st July. This was chosen in preference to the earlier dates to ensure sufficient time for testing and risk reduction. The choice does not affect the overall PPP timetable nor does it have any significant financial or other consequences.

Lord Burnham: My Lords, I thank the noble Lord for repeating the Answer given a couple of weeks ago by his right honourable friend in another place in response to a Written Question. However, it would seem that additional costs will be incurred. What will be the profits accruing to Her Majesty's Government as a result of this separation? What sum of money will accrue to the Ministry of Defence to relieve the defence budget?

Lord Burlison: My Lords, I do not think that it would be in the interests of taxpayers to speculate at this stage on how we believe the new DERA will be constructed and what it will be worth. As regards the precise timing of these transactions, given that value for money will ultimately be the determining factor, it would not be possible or right of me to give a definitive response on this particular issue in view of the discussions that will be taking place over the coming months.

Lord Wallace of Saltaire: My Lords, can the Minister speculate whether the delay until 1st July might have anything to do with the possibility of a general election intervening between now and then, given that the Labour Party will be defending a number of marginal seats containing DERA employees?

Lord Burlison: My Lords, this issue has been in progress over the past 18 months. Those who have followed it closely know that it has not been without its backers or its opponents. Ultimately, although the vesting day has been scheduled for 1st July, this is no indication that it has been in any way determined by a general election. Who knows which side of an election that date will fall? I could not tell the noble Lord the answer to that question.

Teaching Profession

Baroness Perry of Southwark: asked Her Majesty's Government:
	What plans they have to resolve the shortage of teachers and the difficulty of recruiting suitable headteachers.

Baroness Blackstone: My Lords, we acknowledge that there are shortages in some subjects in some parts of the country. However, there are more teachers than for a decade and the number of trainee teachers has risen for the first time in eight years. We have also seen a threefold increase in the number of people applying to train as headteachers. The proposals for teachers' and headteachers' pay that my right honourable friend announced last Friday will help and should be welcomed in those schools where shortages exist.

Baroness Perry of Southwark: My Lords, I thank the noble Baroness for that reply and I welcome the good news it contains. However, how do the Government intend to tackle the underlying problem of low morale among teachers? In recent years that has led to a 50 per cent increase in the numbers leaving the profession for other employment. Furthermore, two-thirds of all vacancies for headteachers in inner London alone have had to be re-advertised two or occasionally three times; even then, some vacancies still remain.

Baroness Blackstone: My Lords, the noble Baroness has put a wide-ranging question to me. The priority given to education by this Government right across the range of policies for which they are responsible is perhaps the most important element here. That priority should help to raise teachers' morale. Substantial additional investment is being made in education at every level. Furthermore, the changes being made by the Government, including bringing in a large number of teaching assistants to support teachers in the classroom, should also help, as will the pay increases announced last week.

Baroness Andrews: My Lords, does the Minister agree that one of the greatest incentives for young teachers is knowing that they are going into classrooms which are in a good state of repair with smaller class sizes? Does she further agree that the support of the General Teaching Council and the National College of School Leadership will genuinely help to raise the morale and professional development of teachers?

Baroness Blackstone: My Lords, I agree with my noble friend. Setting up the National College of Leadership has demonstrated to headteachers the importance that we attach to them. Every piece of educational research shows how important--the noble Baroness, Lady Perry, will be familiar with this--the quality of headteachers is to the quality of our schools. As I said in my initial Answer, there has been a substantial increase in the number of people applying to be headteachers. Long may that continue.

Lord Naseby: My Lords, is the Minister aware that her Answer to my noble friend had an air of complacency about it? Although there has been a small upturn in the recruitment of ordinary teachers, there is still a vast shortage, not merely a spatial shortage, in certain parts of the country. Has not the time come when we should encourage our sixth-formers to think more positively about going into teaching? Do the Government have any proposals to encourage sixth- formers to look more positively at teaching and perhaps to give them some financial encouragement?

Baroness Blackstone: My Lords, I do not think I said anything in my initial Answer that was at all complacent. I acknowledged that there are shortages, but they are not right across the country and in every subject; for example, we do not have a shortage of teachers in primary schools. Of course we should do everything possible to encourage able and talented young people to come into teaching, which is an enormously important profession. It is also an honourable profession. That is something that we should be saying again and again; we should all talk up teaching. In our sixth forms, we are providing information about the challenges of teaching for a young person who wants to work with young people and we are providing all the necessary information about improvements in pay. We need to bring in not only those at the sixth-form stage but young graduates and older people. The Government are operating on all those fronts.

Lord Quirk: My Lords, given that there are some subjects in some secondary schools where recruitment is difficult, does the Minister have any information on the relative recruiting difficulty of the secondary school system in general as compared with the several hundred specialist schools which have been set up in recent years?

Baroness Blackstone: My Lords, I cannot give the noble Lord any figures. I shall be happy to go back to my department to find out whether there is any less of a problem so far as concerns teacher supply in subjects such as science, technology and modern languages in the specialist colleges. As a result of the decision to pay teachers in shortage subjects--such as maths, science, technology and modern languages--a £4,000 bonus, if you like, after their induction year, we have seen a substantial improvement in the numbers coming forward.

Baroness Sharp of Guildford: My Lords, is the Minister aware that it is not only pay but an overload of paperwork and prescription that is causing problems in recruitment and retention in the teaching profession? Is she further aware that since May 1997 her department has set 4,585 targets, which require a total of more than 300 million items to be monitored by schools and local education authorities, often on a quarterly basis? Does she not feel that this is bureaucracy gone berserk?

Baroness Blackstone: My Lords, I accept that some teachers may find excessive the amount of paperwork that they have been asked to do over successive years. It is for that reason that my right honourable friend the Secretary of State has made a commitment to cut the number of documents going to our primary and secondary schools by a third and to reduce by 50 per cent the number of pages through which teachers--for the most part headteachers--have to wade. I hope that that is helpful.

Lord Stoddart of Swindon: My Lords, is my noble friend aware that there is continuing concern at the shortage of male teachers in schools, particularly in primary schools? Can she say what action the Government are taking to remedy that position? Can she further say what is the trend? Is there a trend towards a greater number of male teachers coming into schools, or is there a continuing decline?

Baroness Blackstone: My Lords, the Government are concerned about the number of male teachers working in our primary schools, which is largely where there has been a shortfall in the number of men coming forward. There has been some reduction in the overall number of men teaching in our primary schools. The Government are concerned to encourage young men--and, indeed, older men who are looking for a career change--to come into teaching, especially into primary teaching. The measures that I have mentioned already, particularly pay increases--men appear to be more affected by levels of pay in professions of this kind than women--should have some impact.

Baroness Blatch: My Lords, having read the debate in another place on teacher shortages, I can say that there is complacency in the department about this issue. Across the country and across the sector, particularly in primary and secondary schools, many full-time posts are not being filled. In the subject areas, many whole subjects in secondary schools are going without specialist teaching. The Chief Inspector of Schools said recently that all of this is beginning to have an effect on standards. Does not the noble Baroness agree with that?

Baroness Blackstone: My Lords, I do not agree that the Government are complacent. We are taking a huge range of actions to ensure that we have enough people coming forward to teach in our schools, to ensure that we retain teachers and that fewer teachers leave the profession. The overall vacancy rate is less than 1 per cent; it is about 0.8 per cent. I do not want to be complacent--it would be far better if there was no vacancy rate whatever--but the number of teachers in our schools qualified to teach a particular subject is going up rather than down. However, we must continue to work to keep the vacancy rate at the lowest possible level.

Lord Wallace of Saltaire: My Lords, has the Minister considered the impact of these very welcome rises for schoolteachers on the recruitment of university teachers? A teacher in a secondary school with one year's postgraduate and five to seven years' teaching experience has the prospect of a considerably higher salary than a university teacher with the equivalent rate and three-years of debt-laden graduate work. Does not the Minister think that this will have an adverse effect on the recruitment of the next generation of university teachers?

Baroness Blackstone: My Lords, I do not know. I suspect not. The pool from which people who want to be university teachers are drawn--that is, graduate students who have completed PhDs--is different from the one from which primary and secondary school teachers are drawn. I hope the noble Lord agrees that it is vitally important that we have enough good, high-quality teachers who are committed to the profession working in our primary and secondary schools. Without that, we shall not reach the standards that all universities want to see when they are recruiting from secondary schools at the sixth-form stage.

Baroness Hooper: My Lords, can the noble Baroness give the House any good news in regard to the numbers of teachers of modern languages, particularly Spanish and Portuguese? These languages have traditionally trailed behind German and French in spite of the fact that Spanish is a global language. Can she further say whether there is any imbalance on a regional basis in the numbers of such teachers?

Baroness Blackstone: My Lords, I said in an earlier reply that the numbers of teachers of modern languages have improved as a result of the Government's intervention to pay teachers in shortage subjects an additional £4,000 after they have completed their induction year. I cannot comment specifically on the situation with regard to Spanish and Portuguese teachers. I shall write to the noble Baroness on that issue.

European Monetary Union: Entry Criteria

Lord Taverne: asked Her Majesty's Government:
	Whether they will publish before the next election an assessment of progress in meeting their criteria for possible entry into European monetary union.

Lord McIntosh of Haringey: My Lords, the Government have said that they will make an assessment of the five economic tests early in the next Parliament.

Lord Taverne: My Lords, why on earth cannot the Government, from time to time, give their judgment on progress towards meeting the five tests? If the national institutes and others can do it, why the secrecy in the Treasury? Will the Minister at least assure us that the final judgment as to whether the convergence tests have been complied with will not be left exclusively to the Treasury, in order to quash suspicions in certain quarters that the Chancellor, in taking such a decision, might just be influenced by the effect on his own career--suspicions which I am sure have no foundation whatever.

Lord McIntosh of Haringey: My Lords, the noble Lord is right: they have no foundation. Of course, it is possible for anyone to make the assessment for which he asks. The committee chaired by Professor Huhne, of which the noble Lord was a distinguished member, made such an assessment, as has the National Institute of Economic and Social Research. We simply do not see it as the Treasury's job to give a running commentary. As to the Chancellor's ambitions, the noble Lord, Lord Taverne, must make up his own mind.

Lord Barnett: My Lords, has my noble friend seen the statement in the Treasury's response to the report by the European Union Select Committee of this House, How is the Euro Working? that they will recommend joining the single currency only:
	"if the economic case for the UK joining is clear and unambiguous"?
	Has my noble friend ever come across any economic case that has been clear and unambiguous?

Lord McIntosh of Haringey: My Lords, the noble Lord has had three and a half years to reflect on that question; the words that he quotes were delivered by the Chancellor in October 1997. They have not been queried until now, so perhaps he scored a first.

Lord Renton: My Lords, will the Government, in the public interest, try to be as broad-minded and impartial as possible in this matter, by pointing out the circumstances in which their criteria for entry into the euro have not been met?

Lord McIntosh of Haringey: Yes, my Lords.

Baroness Williams of Crosby: My Lords, will the Government consider adding a fifth criterion; namely, the current effect of uncertainty about the euro on British manufacturing and British farming? Is the Minister aware that the directors of Corus attributed one of the company's troubles to the level of the euro against the pound? Is he further aware that one of the reasons given for Vauxhall winding up its plant in Luton was, again, the exchange rate between sterling and the euro; and that the green pound is worth something like a fifth less to British farmers than it is to their competitors in the rest of Europe--again because we remain outside the euro-zone?

Lord McIntosh of Haringey: My Lords, there is nothing magic about the number five, but there are already five economic criteria, as set out by the Government. They include flexibility to cope with economic change, the effect on investment, and the effect on employment. Those three criteria cover the valid points that the noble Baroness makes.

Lord Stoddart of Swindon: My Lords, will my noble friend agree that there are criteria to be considered other than economic and financial criteria--for example, the constitutional implications of joining the euro-zone? Will the Government consider those points before making any recommendation to Parliament?

Lord McIntosh of Haringey: Yes, my Lords; we have always said so.

Lord Saatchi: My Lords, does the Minister agree that the acid test of whether a union will be successful--a marriage, let us say--is whether there is a meeting of minds between the prospective partners? Is there a meeting of minds between the Government and the president of the Bundesbank, who says that,
	"a single currency does not require a single government, but a single government will follow"?

Lord McIntosh of Haringey: My Lords, I am not sure whether an "acid test" implies only one acid, or whether we are allowed a number of chemical tests as acid tests. We certainly listened with interest and attention to the president of the Bundesbank, as we do to all major figures in economic life in Europe.

Lord Hoyle: My Lords, does my noble friend agree that, save in the view of the zealots who are either pro or anti the euro, the Government have got the criteria right? Will he confirm that at the end of the day, when we believe it is in Britain's interests, the final decision will be taken by the British public by means of a referendum?

Lord McIntosh of Haringey: My Lords, I never like using the word "zealots". Whenever I have used it, I have been shot down in flames for doing so. Yes, of course, as I should have said originally in reply to the noble Lord, Lord Taverne, it is not merely a matter of the Treasury making up its mind for itself; we have a commitment that the Government have to make a recommendation, first to Parliament and then to the people of this country, before entry.

Lord Blaker: My Lords, does the noble Lord agree that the point made by the noble Lord, Lord Taverne, has great merit? Would not any government assessment immediately be met with counter-assessments by a number of distinguished economists--possibly putting forward an even larger number of opinions? Does that not show that any answer to at least four of the tests must be subjective? Therefore, will not the tests give the Government the opportunity to hold a referendum when the public opinion polls point to a "Yes" vote--in the unlikely event of that ever happening?

Lord McIntosh of Haringey: My Lords, the noble Lord almost invites me to make cheap cracks about the divergence of opinion among economists, and I am certainly not going to do that. Of course there will be different views; there is no fully objective reality. However, there are political realities. It is on the basis of the political and economic realities, and constitutional considerations, that the Government will make up their mind as a result of the Treasury assessment and make their recommendation to Parliament and to the people of this country.

Criminal Defence Service (Advice and Assistance) Bill [H.L.]

Report received.
	Clause 1 [Extent of duty to fund advice and assistance]:

Lord Bach: moved Amendment No. 1:
	Page 1, leave out lines 5 to 7 and insert--
	("(1) Subsection (1) of section 13 of the Access to Justice Act 1999 (duty of Legal Services Commission to fund advice and assistance as part of Criminal Defence Service) shall be treated as having been enacted with the substitution of the following for paragraph (b) and the words after it--").

Lord Bach: In moving this amendment, for the convenience of the House, perhaps I may speak also to Amendments Nos. 2 and 3. All three amendments have been tabled in my name. I tabled and withdrew these amendments at Committee stage in order to give your Lordships a reasonable length of time in which to consider the changes that I propose to make. I hope that during the two-week period that has since elapsed the House has had time to consider the amendments proposed.
	The effect of the amendments, taken together, is to allow the Bill, on enactment, to have retrospective effect. Amendment No. 1 provides that the Access to Justice Act will be read as if it had always been amended by this Bill. Amendment No. 2 provides that secondary legislation made under the powers in Section 13(1) of the Access to Justice Act may also have retrospective effect. Amendment No. 3 changes the commencement date of the Bill--there is no longer any need for the Bill to commence on 2nd April and it will be commenced on the day on which it receives Royal Assent.
	I shall explain why the Bill needs to have retrospective effect. At Second Reading, I explained that it was essential that the Bill received Royal Assent in time for its provisions to be in force before the criminal defence service is introduced on 2nd April 2001. In practice, this meant that we needed Royal Assent by 9th March. This would allow time to make the secondary legislation using the power in the amended Section 13 of the Access to Justice Act, which is necessary to maintain the current levels of legal assistance available to those involved in criminal investigations and proceedings.
	When the Bill received its Second Reading on 21st December, I was grateful for the reception it was given. Since then I have received letters from all of the main legal groups confirming that they support the introduction of the Bill. The Committee stage took place on 22nd January. No Minister could ever hope for swifter progress! However, I am concerned that we may not be able to guarantee Royal Assent in time. This would result in a lacuna in which the powers under the unamended Section 13 of the Access to Justice Act may be insufficient to maintain the current levels of legal assistance.
	No one knows the date of the next general election; however, the possibility of an early election, combined with an early Budget, could put the parliamentary timetable under even greater pressure than is usually the case. If that happened, it is possible that business managers may be unable, among competing priorities for parliamentary time, to give the time required for this Bill in order for it to receive Royal Assent before 9th March.
	It is for this reason that I feel that the Bill should be amended so as to have retrospective effect. Any secondary legislation will also be capable of having retrospective effect.
	I am aware--and, indeed, I agree--that in general it is important that legislation should not have retrospective effect; people have a right to know where they stand under the law. However, in this instance the retrospective nature of the Bill will simply enable the status quo to be preserved. By making this amendment, the right that currently exists, for example, to consult a duty solicitor, or to receive legal advice and assistance after as well as before being the subject of a criminal charge, will be maintained. The critical point is that no one will be adversely affected by the retrospective nature of the Bill, but without it significant elements of our legal aid system could cease to be available.
	Of course, I am still hopeful that the Bill will complete its progress in good time and that the introduction of retrospectivity will prove to have been over-cautious. If this proves to be the case, no harm will have been done. But, by taking this action, if it turns out that the Commons business managers are unable to accommodate the same swift passage which this House has provided, there will be no possibility of gaps in our provision of important legal support to those facing criminal charges.
	I hope that in those circumstances the House will support the amendments. I beg to move.

Lord Renton: My Lords, it is a fundamental principle of our legislation that it should not be retrospective. In this case, however, I think that the Minister has put forward valid and strong reasons for allowing this to happen. Another factor he did not mention but which is relevant in my opinion is that the retrospectivity will be for a very short time. But, having said that, I hope that it will not be regarded as an easy precedent to be followed on other occasions.

Lord Goodhart: My Lords, I am happy with the Bill which closes what was an unintended lacuna in the Act of 1999. I am equally happy with the retrospective effect here which, as the noble Lord, Lord Renton, pointed out, is for a short time, if, indeed it can be described as retrospective at all because, of course, it is not in any event retrospective to an earlier date than 2nd April when the criminal defence service will come into operation. It has been announced well in advance of that. I am interested in the reason put forward for the amendments which imply that we might be into the pre-dissolution whirlwind as early as 9th March which, in turn, implies a possible election date earlier than 3rd May. However, I shall leave the Minister to give such comment on that as he thinks fit.

Lord Ackner: My Lords, I am delighted to observe that in one very small and limited aspect of access to justice the Government see virtues in the status quo.

Lord Kingsland: My Lords, I wholly endorse the observations made by my noble friend Lord Renton and the noble Lord, Lord Goodhart. In those circumstances I have nothing to add.

Lord Bach: My Lords, I am grateful to those noble Lords who have spoken, in particular to the noble Lord, Lord Renton, who spoke from his great experience. We certainly do not see this as an easy precedent. It would be quite wrong to do so. The noble Lord, Lord Goodhart, tempts me but I advise him not to read anything very much into what I had to say.

On Question, amendment agreed to.

Lord Bach: moved Amendment No. 2:
	Page 1, line 15, at end insert--
	("(2) Regulations under subsection (1) of section 13 (as amended above) may include provision treating them as having come into force at the same time as that subsection.").

Lord Bach: My Lords, I have effectively spoken to Amendments Nos. 2 and 3. I beg to move.

On Question, amendment agreed to.
	Clause 2 [Short title and commencement]:

Lord Bach: moved Amendment No. 3:
	Page 1, line 18, leave out subsection (2).
	On Question, amendment agreed to.

The Euro: EUC Report

Lord Tomlinson: rose to move, That this House takes note of the report of the European Union Committee, How is the euro working? (18th Report, Session 1999-2000, HL Paper 124).

Lord Tomlinson: My Lords, I say right at the outset that the report seeks to avoid at least two contentious issues concerning the euro. The first is whether or in what circumstances the United Kingdom should participate in economic and monetary union. Secondly, we decided not to permit ourselves the luxury of attempting to look into the future. We therefore forswore the use of the crystal ball as any sort of predictive tool.
	The genesis of the report is clear. On 1st May 1998 11 member states took the momentous decision to proceed to stage three of economic and monetary union. The report seeks to evaluate the degree to which the hopes and expectations of those participating member states have been met. The report also recognises that the Government's position is that,
	"in principle, a successful single currency within a single European market would be of benefit to Europe and to Britain.--[Official Report, Commons, 27/10/97; col. 583.]
	My right honourable friend Gordon Brown continued at col. 584 of the Official Report,
	"if, in the end, the single currency is successful and the economic case is clear and unambiguous, the Government believe that Britain should be part of it".
	The report, following on from the largely positive evaluation of the European Central Bank in June 1998, under the chairmanship of my noble friend Lord Barnett, is now produced as a contribution to the debate on whether, to use the Government's word, the single currency has so far been "successful". In this task we had the enormous benefit of our former clerk, Dr Elizabeth Hopkins, whose skill and dedication set standards that the House had no right to expect. We could not have completed our tasks fully without both her work and that of our specialist advisers, Professor John Driffill, who guided us skilfully through a minefield of complex economic analysis, and Mr Martin Christensen, who was specially helpful in his contribution to the provision of the comprehensive set of economic data in Appendix 3 of the report.
	The work of your Lordships' committee is greatly enhanced by the ready, willing and informed assistance of our clerk and specialist advisers. Dr Hopkins decided to retire after the report. The whole committee and many beyond send their very best wishes for her future. We welcome Ms Anna Murphy, the new clerk, who knows that she has a hard act to follow and is already meeting the challenge. The committee would also wish me on its behalf warmly to thank Helen McMurdo for her invaluable contribution to the efficient work of the committee in producing this difficult report.
	No report on the operation of the single currency can ever be definitive or final. On 1st January 1999, barely two years ago, the euro was introduced. On 1st January 2002, almost a year ahead, notes and coins will begin to circulate. Against that background the effects of the single currency cannot yet be disaggregated from other causes and events: the success of the single European market; the stability and growth pact and the concomitant economic disciplines that it forces upon member states; the general economic upturn in the euro-zone and what was cause and what was effect; and the information technology revolution. Those were all taking place at the same time as the introduction of the euro. It is almost impossible, therefore, to determine how successful the euro has been.
	However, having said that, our inquiries show that it was fully appropriate and by no means too soon to take a considered, interim view on how the euro is working so far, especially in the experience of those countries which are already members of the euro-zone, the role of the European Central Bank and the development of the euro. Hardly surprisingly, the euro-zone governments which gave evidence to us stated that their expectations were certainly fulfilled and frequently exceeded; and that in their opinion the euro was a success.
	The Governor of the Bank of England gave clear evidence; and while giving no view--nor was it sought--on whether sooner or later the United Kingdom should join the euro, Mr Eddie George judged that the euro was working well and that the euro was a success for those member states participating in it.
	I contrast the clear view of the Governor of the Bank of England with the response of Her Majesty's Treasury. When one considers that it has had over two months to produce it, I find the response insulting to your Lordships' House and its Select Committee. The report's two pages purports to reply to our main conclusions by studiously ignoring them. My only hope is that Treasury officials have briefed my noble friend Lord McIntosh more fully than they have deemed it necessary to give us of their wisdom.
	Page 7 of the report lists many of the points that the committee deemed it necessary to explore with witnesses. Was monetary policy achieving price stability? Could the European Central Bank formulate monetary policy with independence while being both transparent and accountable? Were member states adopting appropriate fiscal policies and maintaining budget discipline? Was the integration of financial markets proceeding smoothly and producing anticipated benefits such as lower interest rates, greater liquidity, lower transactional costs and the removal of exchange rate risk? Was the changeover to the euro proceeding smoothly? Was the single currency aiding the completion of the single market? Would the single currency enhance the ability of euro-zone countries to respond to economic crises?
	Having pursued those questions when gathering evidence, we came to the view that considerable progress had been made in relation to most of the criteria but less in relation to others. We found evidence in abundance of the economic advantages. The single currency had reinforced the single market. Markets are increasingly transparent bringing competitive improvements to industry as well as to consumers. The introduction of the euro had led to a strengthening of the disciplines of the stability and growth pact on the one hand and the determination of member states to comply with them on the other. The evidence indicates that trade and investment have benefited from the introduction of the single currency.
	With regard to financial institutions and markets, it was clear that within and beyond the euro-zone there has been benefit which more than compensates for any earnings loss from reduced foreign exchange transactions. The euro is now widely used for bond and stock issues. This benefits consumers from the liquidity of the instruments created and issuers by reducing the cost of raising money. Evidence we received suggested that the euro now ranks second to the dollar as an international investment, reserve and anchor currency with the potential to challenge the dollar's leading role.
	We noted the potential--I emphasise "potential"--downside of the "one size fits all" monetary policy. It deprives participating member states and their central banks of adjusting their economies either by altering exchange rates or the introduction of differential interest rates. Euro-zone economic growth has meant that there has been no great pressure on individual member states to break the rules. There has been, therefore, no empirical evidence on how serious such a downturn could be in practice. But I believe that it is right and proper that I should draw the House's attention to the fact that the inability of countries in those circumstances to use exchange rates and interest rates throws burdens on the remaining tools. The scope of fiscal adjustment is already severely limited by the stability and growth pact. On structural change, we noted that some progress had been made but it was patchy and was not leading to sufficient productivity gains; and although there was some movement of flexibility in the labour markets it was not adequate as regards the long-term needs of the euro-zone.
	The Select Committee considered Ireland as a possible special case. Fast economic growth and rapidly rising inflation gave rise to the need to consider Ireland separately. As a member of the euro-zone, Ireland cannot now respond by recourse to interest rate movement. However, all our Irish witnesses--from governmental, banking and non-governmental outside banking sectors--predicted that Ireland is likely to experience a soft landing. The committee limits its conclusion to the expression of hope that they are proved right.
	I turn to the careful consideration we gave to the European Central Bank and the need for strong management, transparency and accountability in a form which does not prejudice its independence. I do not propose to go through all the arguments because they are made clear in the summary of conclusion on page 9. But on management we stated clearly that the evidence was that the European Central Bank had done pretty well so far. If anyone thinks that those are faint-hearted words, they were the words of the Governor of the Bank of England. When asked whether he was damning with faint praise he said very clearly to your Lordships' committee that he was a central banker and when he spoke of someone else's bank doing "pretty well", that should be regarded as high praise indeed.
	On the question of transparency, the committee welcomes the fact that the European Central Bank has been more transparent than had been expected and is becoming more so. It is about to publish much of the data on which it bases its decisions.
	On accountability, no one wanted the European Central Bank to be elected. The committee struggled for a definition of accountability. However, we went on to recognise the role of the European Parliament as the body to which the European Central Bank is formally accountable. We welcomed what we were told of the European Parliament's intention to strengthen that accountability.
	We inevitably looked at some length--although I shall mention the issue only briefly--at the external value of the euro and its persistent fall since the currency's introduction. We noted with particular interest the persuasive argument of the Governor of the Bank of England that such a fall reflects a continuing net outflow of long-term capital from Europe to the United States. Once that flow ceases or is reversed, perhaps when relative asset prices have changed sufficiently, the influence of economic fundamentals will reassert itself and the rate of the euro against the dollar will rise. Since our report was printed there has been a 6 per cent increase in the value of the euro against sterling and a similar change in its relationship to the United States dollar.
	The report is inevitably interim. It cannot be definitive. It properly did not address United Kingdom membership of the single currency. That is a question for the Government--a question that, in my strictly personal view, they should turn to sooner rather than later. However, it is important to have engaged in the study. We reached broadly favourable conclusions on the progress so far from the perspective of those in the euro-zone. I remain hopeful that, after an election, the Government will find a capacity to discuss European monetary policy and possibly even to formulate a view, however tentative, on a subject that will not go away, even if there is an attempt to insist on ignoring it.
	This is an interim report on a subject to which the Select Committee will inevitably need to return. At the moment, I believe that it is an informed evaluation that I hope is of benefit to your Lordships' House. I beg to move.
	Moved, That this House takes note of the report of the European Union Committee, How is the euro working? (18th Report, Session 1999-2000, HL Paper 124).--(Lord Tomlinson.)

Lord Renton of Mount Harry: My Lords, it was a privilege for me to serve on Sub-Committee A of the European Union Select Committee, under the very able and competent chairmanship of the noble Lord, Lord Tomlinson, who has just spoken. I declare an interest as the chairman of a substantial investment trust that specialises in continental European shares. I strongly support the noble Lord's comments about the Treasury's disgraceful reply to our report. It contains just seven lines referring to us and our conclusions. The rest is a re-statement of well known government positions. I note that the minute is unsigned. I am not surprised. Any Treasury official would feel ashamed to put his name to such an inadequate minute.
	Like the noble Lord, Lord Tomlinson, I was struck during our inquiry by the enthusiasm of our witnesses for progress so far in economic and monetary union and the single currency. Only one witness, representing the Irish interest, was seriously concerned. I shall deal with that in a moment. On the whole, our witnesses were more positive than I had expected about the success of the euro so far in promoting internal trade, encouraging inward investment, increasing competitiveness in the continental European market and ensuring transparency of prices from one end of the continent to the other.
	Two clear drawbacks were identified, one of which the noble Lord, Lord Tomlinson, has just spoken about--whether "one size fits all" can be suitable for every market from Scandinavia to Greece and from Ireland to Germany. I notice that Mary Ann Sieghart in The Times last week dwelt at some length on the experience of Ireland. She pointed out that the Irish recovery had, if anything, been too rapid and was putting too much pressure on the Irish economy. Under those circumstances, Ireland should have raised its interest rates by considerably more than was permitted by the European Central Bank.
	However, the fact is that in the past four or five years, Ireland has had the most astonishing recovery. It has changed from traditional industry to investment in and mastery of the IT industry with fantastic success. There are now advertisements seeking workers to fill skilled or semi-skilled jobs in Ireland. We should also remember that Ireland represents only 1 to 2 per cent of the European Union's GDP, so it is fair to say that it is de minimis for the European Central Bank. It would be very different if one of the big four--Italy, France, Germany or Spain--stepped out of line. That has not happened yet, so we do not know what the outcome would be.
	The other difficulty, about which our report spoke rather less, is the fact that the European Central Bank does not have a single government directly behind it to add political weight and to lean on the media and politicians such as ourselves in support of its decisions when a bit of arm-twisting might be needed. To Alan Greenspan, chairman of the Federal Reserve in the United States, are now attributed all the qualities of Solomon when it comes to financial markets. I see that there has been a motion that his term of office should be increased by another 25 years, which would take him to the good age of 99. He would certainly accept that his work was substantially enhanced--and at times definitely helped--by support from Washington and President Clinton. It is interesting that one of the first interviews that the new President Bush gave was to Alan Greenspan.
	There is no answer to this point. The European Central Bank is a very independent central bank--probably more independent than any of its predecessors in continental Europe, including the Bundesbank. President Duisenberg has been criticised at times. The noble Lord, Lord Tomlinson, was quite generous in his comments. One or two of our witnesses thought that if Greenspan had been president of the ECB rather than Duisenberg, the fall in the value of the euro would have been about half what it has been. Some have considered him weak and uncharismatic. He has been blamed both for putting up interest rates and for not putting them up. That may mean that, as time and the bank settle down, he and the ECB have not got it too wrong. In the present situation, the European Central Bank does not seem to be doing so badly after all.
	The weakness of the euro, which we touched on in our report, was a blessing in disguise for continental manufacturers. I was amazed that the British media seemed always to misunderstand that. As we saw in the recent sad decision by Corus, it enabled French, German and Dutch manufacturers to recover lost ground in export markets at the expense of British manufacturers. The experience of the weak euro was almost exactly the same as ours. When we left the ERM in 1992, sterling lost around 20 per cent in value against the deutschmark. That was a boon to our manufacturers and led to some of the increasing industrial prosperity inherited by the current Labour Government when they took office in 1997.
	Many people will hope that the euro does not now recover too much and that, for example, it does not go above parity to the dollar. But at present it must be considered exciting that the continental European gross domestic product is expected to rise at an average of between 2½ and 3½ per cent over the years immediately ahead. That figure is likely to be in excess of the American GDP rises and, therefore, it points to a general improvement in economic conditions on the continent.
	As the noble Lord, Lord Tomlinson, said, at the end of our report we manacled ourselves with regard to talking about the future. In the last sentence of the report we said that we would look to the system, the bank and the currency to rise to the challenge of future opportunities and cope with problems as they occurred. However, I shall crave the indulgence of the House for a moment or two while I give a few personal thoughts about the future.
	Last week I attended a conference organised by my noble friend Lord Skidelsky, as chairman of the Social Market Foundation, at which both Friedrich Merz, who is co-leader of the German Christian Democrat Union, and William Hague spoke. I was struck by the words of Friedrich Merz. He said that so far as concerned Europe, EMU--economic and monetary union--and the launching of the euro represented a crossing of the Rubicon and provided a common conceptual basis for tackling the future. He added that it formed a shared conceptual basis among the members of EMU for the shaping of economic and social reform. I believe that that is correct. Of course, there is still much to be done--notably the deregulation of labour markets, particularly in Germany, and the change of all the social security systems throughout continental Europe. However, the conceptual basis for doing that is now in place and the practical steps will surely follow.
	At the same conference, an ex-colleague of mine, Tim Eggar, who is now chief executive of an oil company, said that he believed that people in this country completely under-estimated the importance of the single currency. I very much agree with that sentiment. I believe that next January, when European notes and coins are in circulation, it will come home to average European citizens just how important is the single currency. They will suddenly discover a far greater openness in competitive pricing throughout continental Europe and a decline in the cost of doing business. There will be a painful realisation for the 8 million Britons who take continental holidays every year that every time they go from and come back to this country they will still lose approximately 10 per cent of their money through the hands of Thomas Cook and others.
	Britain has not yet crossed that Rubicon, and we all know the reasons why. However, in his interview in The Times today, I believe that the Foreign Secretary was quite wrong to talk so much of Britain's leading role in Europe. Of course, we are wise. I am told that the well prepared documents produced by our civil servants, with the exception of the Treasury memo to which we have already referred, are generally much better than documents produced by civil servants in any other country. We are particularly important in the defence field, and we shall strive for reform of the common agricultural policy.
	But is ours a leading role? No. To refer to a "leading role" in this instance is like saying, "I am captain of the ship, but I am not going to look at the compass, nor touch the rudder". In my judgment, until we cross that Rubicon we are committing ourselves inevitably to a less and less important role in the European Union. Some people want that; I do not. Of course there are dangers ahead, as our report points out. When are there not dangers? However, I see economic and monetary union as increasingly successful and the euro as a currency that increasingly will have a role to play in national reserves.
	After serving on Sub-Committee A, after taking part in producing the report and after many months of thinking, I conclude with the hope that the referendum will come soon. When it does, I hope and expect that the answer will be "yes".

Lord Taverne: My Lords, first, I make my personal position clear. I undertook to speak in the debate on the assumption that it would finish by 6.30 p.m. That is the latest time at which I can leave in order to catch a train so that I may give a lecture in Brussels tomorrow.
	As a non-member, I find the report extremely valuable and, indeed, enlightening. I want to talk about what it avoids; namely, how it affects our decision as to whether or not to join the euro. The report states that these are early days and, in effect, it says, "So far, so good". However, due to the weakness of the pound, it has not necessarily been good for the United Kingdom. Undoubtedly there are dangers which we could have avoided if we had joined earlier. Over the next few years we may well find that those dangers increase as the reality of being outside the euro-zone becomes more and more clear to foreign investors in this country.
	I want to say what is clear from the report. So far, the euro has had good effects. I shall not repeat what the noble Lord, Lord Tomlinson, said in his admirable speech. There has been increased competition and, as I believe the report points out, increased investment and restructuring of industry, perhaps on the scale which we saw when the Common Market was first founded, but in which we are not participating at present.
	The report also mentions that the euro has helped to accelerate structural reform. That is a matter of great importance about which I want to say a little more. A fact which has not been much noticed in the British press, which still paints a picture of a sclerotic Europe, is that the extraordinary increase in the amount of part-time work has contributed to the drop in unemployment. The general view has prevailed that wage flexibility on the Continent is rather worse than it is in this country. In fact, one finds that some wages in east Germany are now 75 per cent of the level of those in west Germany. That degree of wage flexibility was brought about by the existence of the euro and is rather greater than that found inside the United Kingdom.
	As a result of the euro, there has been considerable pressure to reform pensions in Europe. Some five years ago I wrote a pamphlet which pointed out the pension time bomb, the dangers which that involved and the size of the hidden liabilities. I have just finished writing another paper and the change has been quite remarkable. Pressure is now being exercised to raise the retirement age. Then, the retirement age was going down; now it is rising. Fundamental and enlightened reforms in such countries as Sweden have shown the way, providing incentives for longer working lives. To some extent, those reforms have been followed in other parts of the European Union. Indeed, participation rates have risen sharply. That will have a considerable effect on the hidden liabilities of which so many eurosceptics have been scared.
	Of course there are dangers, and perhaps the report understates the problems which still exist with regard to the co-ordination of fiscal policy. I do not believe that a culture of co-ordination, which will become increasingly necessary, has yet developed in Europe among the euro-zone 12. To my mind, part of the reason for the huge investment in the United States and for the relative weakness of the euro is that the markets do not have the confidence which they should in the co-ordination of fiscal policy. A most interesting paper on that subject was written recently by two Frenchmen--Jacquet and Pisani-Ferry--and published by the Centre for European Reform. I believe it to be an extremely important paper and it addresses that problem.
	I turn to the lessons for the United Kingdom. The first lesson that stands out in the report's minutes of evidence is the fact that all businesses in Europe are convinced of the euro's benefits. The views of M Trichet appear in paragraph 166 on page 48 of the report. He said that businessmen in Europe,
	"consider that their position has dramatically changed for the better. I have no memory of a single French, German or Belgian entrepreneur that I know that would give evidence to your Committee and say: 'I think it is no good, we are going in the wrong direction'. They are all seeing the benefits of having that very, very large single market with a single currency".
	Businesses in the UK, please take note. Some UK businesses are still saying, "That is all very well for European continental businesses, but we are different". That is the attitude that we adopted when the Common Market was first formed. It is the attitude that has always made this country late to join extremely successful developments on the Continent.
	We should study what the report tells us about what I regard as the major difficulty in this regard, which has been referred to on many occasions outside the House and in this debate. That difficulty involves having one interest rate for so many countries. As the noble Lord, Lord Renton of Mount Harry, said in an extremely notable speech--I agreed with his every word--Ireland is an important case in point. It was interesting to note the article by Mary Ann Sieghart in The Times the other day. She is a talented writer for whom I have great respect, but on this occasion her article fell well below her best. Her article was full of mistakes and, economically, it was rather illiterate. Had she bothered to read the report, she would have found a very different story. I refer in particular to the witnesses for Ireland. It seems rather patronising to say, "They may think that they have done well out of the single currency, but we know much better".
	The report mentions that in 1996 the Economic and Social Research Institute studied the economic implications for Ireland. It concluded that on balance the arguments were in favour. The minutes of evidence refer to an article in the Irish Times by Mr Terry Baker. He wrote:
	"the risks attached to EMU entry have diminished considerably since mid-1996 ... With hindsight, it appears that our 1996 assessment underestimated the advantages of initial entry".
	We should study Ireland's current problems, including inflation. Yes, of course that country has inflation, but does that make the Irish regret entry? No, it does not. The Irish testimony makes it clear that if Ireland had remained outside monetary union, inflation would have been worse. Despite Irish inflation, goods in the shops in Ireland are cheaper than they would be in the United Kingdom.
	Professor John Fitz Gerald stated, on page 78 of the minutes of evidence, that,
	"the Irish economy is too competitive ... wage rates have to rise".
	One way in which a country that has a high rate of inflation and is expanding too fast inside monetary union can adjust is through a rise in prices. What did the evidence reveal about problems with house price inflation? It revealed that the problem would be worse outside monetary union. Professor Fitz Gerald's concluding words in the minutes of evidence were:
	"The consequences of getting things wrong are much less severe for the Irish economy within monetary union than they would have been outside it".
	The problem that that country faces, in comparison with others, looks terrible. It had to slow down its rate of growth from 8 per cent, which it had maintained for some years, to a modest 5 per cent per annum.
	I regret, on behalf of the sceptics, that there is little comfort for them in this thorough report or its minutes of evidence. All members of the union are convinced that it was right for them to join. There is no reason why the United Kingdom should not prosper as other countries have done. The experience of those in the Union and all the arguments favour our membership.

Lord Barnett: My Lords, I hope that I shall be forgiven for speaking in this debate although I am not now a member of the committee that produced the report. However, as a former chairman, I congratulate my successor, Lord Tomlinson, on chairing the committee and the committee on producing an excellent report.
	My noble friend Lord Tomlinson referred to a successful single currency. I shall come to that later. The report is, understandably, purely factual: the committee wanted to produce a unanimous report. Having said that, I am not sure whether one or two of its members agreed, although the report was unanimous. They would have disagreed with one or two of the points made by my noble friend.
	Perhaps I should declare an interest. My views are pretty well known--I am as strongly in favour of our joining the single currency as I have always been. I was glad to note that the noble Lord, Lord Renton of Mount Harry, concluded--not necessarily because of the committee's report--that he, too, hopes to see us become members of the European Union single currency zone.
	Eurosceptics will be unhappy, regardless of the facts disclosed in the report. The euro might have been strong, weak, or going nowhere, but that would have made no difference whatever to Eurosceptics.
	In principle, the Government have said yes, subject to five pretty meaningless tests. I raised the matter at Question Time. We are now aware of the Treasury's response. The noble Lord, Lord Renton, rightly described that, although I refrain from using his language. The report refers to the economic case for the UK's joining having to be clear and unambiguous.

Lord Renton of Mount Harry: My Lords, it was not the noble Lord, Lord Renton, who said that; it was the noble Lord, Lord Renton of Mount Harry.

Lord Barnett: My Lords, perhaps I should apologise to the noble Lord, Lord Renton. I think he knows that I meant to refer to the noble Lord, Lord Renton of Mount Harry, but I am not sure whether he would agree with my argument.
	Many on the Opposition Front Bench are unambiguous about what we should do about membership of the euro-zone. Some of them are even semi-detached to the European Union.
	The Government have, in principle, agreed that they will join at some point. As the noble Lord, Lord Renton of Mount Harry, said, I hope that that will not delay too long. The UK's concern, as we all know, is not about the economic case; it is about the related political problems. I hope it is accepted that the euro-zone and this country will be pretty convergent pretty soon, if we are not convergent already.
	In paragraph 137 of the report, the Governor of the Bank of England, who now likes to be known as Sir Edward George, said that,
	"on the basis of fundamentals it was difficult to understand the fall in the value of the euro".
	I am not a betting man. If I were, I should not mind investing a few bob in the euro as of now; I should bet on what is likely to happen to the euro over the next few years.
	One of the most serious criticisms of having a single currency is the fact that one interest rate has to fit all countries. That serious case needs to be answered. To an extent, that argument currently applies within the UK, because parts of the UK are very different from each other. Scotland, the North East and parts of the North West are very different from the South East, but they have to live within a single currency and manage to do so, although sometimes that does not work out too well. The argument seriously applies to the 11 member states in the euro-zone and, to some extent, it will apply even more when the 12th country, Greece, joins.

Lord McIntosh of Haringey: My Lords, Greece is already in.

Lord Barnett: My Lords, I am sorry, I am reminded by my noble friend that Greece joined on 1st January.
	By now, having listened to some of the critics in relation to the subject of the single interest rate fits all, one would have expected to see, within nearly two years, some really disastrous economic positions. In fact, the situation has been anything but disastrous for those 12 states, 11 as it was, within the euro-zone. As we know, there are very different economic circumstances in each of the 11 states.
	It is worth looking at what has happened. Table 1 attached to paragraph 36 of the report shows that on average--I know that there are wide variations within any average, but one must look at the average within the euro-zone--growth of GDP in the European Union 11 member states in 1999 was 2.4 per cent and in 2000, 3.4 per cent. It has been going pretty well. One can hardly say that the single currency has destroyed the situation or made it very difficult.
	Indeed, if one looks at all the tables in Appendix 3, there is no stagnation so far. I say "so far" because one cannot make forecasts. Some economists try to make forecasts or projections but in practice it is not possible to make a forecast as to how the euro-zone or even the UK economy will be in two, three, four or more years. But certainly as of now one can say that the single currency in the euro-zone has not done any serious damage. Indeed, it has been positively helpful in some ways to which I shall refer.
	Unemployment within the euro-zone is, of course, much too high. It is much higher, on average, than in the UK. But it is falling and within some member states in the euro-zone it is falling at a rate which is above the average. As I said, one must always look carefully at averages because they mask serious problems in some areas. Certainly in some countries within the European Union, or the euro-zone as it is called, the situation is far from that which exists in the best of those countries.
	Inflation, as paragraph 39 of the report points out, was within the 0 to 2 per cent target range throughout 1999 and has risen slightly since. Again, averages mask wide variations. Reference has already been made to Ireland. Inflation has been 5.1 per cent in Ireland while it is only 1.6 per cent in France. So inflation rates vary within the euro-zone. One should not be too surprised by that.
	Overall, by now, we certainly have not seen any of disasters forecast by the Eurosceptics because of the one size fits all problem. It is worth referring to--I always call him Eddie George--Sir Edward George, the Governor of the Bank of England. In paragraph 41, he is quoted as saying, "It is working pretty well". That is not bad coming from the Governor of the Bank of England, who can hardly be described as a Europhile.
	I concede that problems will undoubtedly be created within the euro-zone. But we have a relatively successful euro-zone, as the report brings out. There will be difficult years here in the UK, as well as inside and outside the euro-zone. But the report brings out the tremendous advantages which will come to members of the euro-zone, as will be seen by any objective reader of the report.
	The facts are clear. Paragraph 86 of the report says that membership has been helpful in other ways which have not generally been reported. It helps in withstanding shocks within a possible serious crisis. That is not unimportant.
	But more than that, inward investment is clearly a serious matter. Nobody can dispute that. If it were not clear that we shall shortly be joining the euro-zone, inward investment here would be very seriously damaged. But there are enormous benefits from the removal of the exchange rate problems and the risks inherent in that. The noble Lord, Lord Renton of Mount Harry, referred to the 8 million holidaymakers. That will be a serious matter for them personally. But it is even more serious for businesses which are competing within Europe and which will no longer have the exchange rate problem and the risks involved with that. That will be much more significant for the UK.
	Any objective observer will agree that the euro is working well so far. Of course, it is still a weak euro. The UK Treasury tells us--and I am not referring to its response to the committee but the evidence from witnesses--in paragraph 147 that,
	"one would expect a slow response to a new currency".
	I shall not speculate as to whether it would have been better under Trichet or Duisenberg. The noble Lord, Lord Renton of Mount Harry, has had a few words to say about that. Nobody could say that Mr Duisenberg is the most charismatic fellow in the world. But he is running the ECB. He is not the only member of it and those responsible have managed relatively well. I have a feeling, having read what he says in the report, that my noble friend Lord Desai will disagree with me about that. But I think he is fairly alone in relation to that, as he always is.
	All in all, the facts in the report speak for themselves. I hope that the UK will be joining the euro-zone very soon.

Lord Shaw of Northstead: My Lords, it is a great pleasure to follow the noble Lord, Lord Barnett. I am grateful, as I believe are all members of the committee, that he has taken part in the debate. When these debates take place, too often one hears people saying, "Oh, I was not a member of the committee so I did not feel that I needed to take part". Contributions from someone such as the noble Lord, Lord Barnett, who was a noble chairman of the committee for several years--we are much indebted to him for the work that he did for that committee during those years--helps to make these debates that much more worth while.
	I am as firmly in favour of the European Union as the noble Lord, Lord Barnett, is. But while I have every hope that the euro will succeed, I have concerns about its future. Everybody must accept that the creation of the single currency has been an enormous step in the development of the European Union. Whether or not we should have joined the 11 countries, shortly to become 12, is not a matter for debate today. But the step has now been taken. Whether we are in it, whether we are to join it or whether we remain out of it for some years, it is in all our interests that the euro is a success. If it is a failure, it will hurt members of the euro and those who are not members of the euro.
	Therefore, it is right that Sub-Committee A should continue to monitor the progress the euro is making. I have had the privilege of being a member of the committee for the past four years. I believe that its work is of value not just to this House but to a much wider audience. I add my thanks to the noble Lord, Lord Tomlinson, and to our splendid Clerk, who alas has now retired, Dr Elizabeth Hopkins. The report, its contents and its timing largely result from their great efforts.
	My first reaction was to note the general satisfaction expressed by witnesses at the way in which the euro is working. That must be encouraging. For example, Dr Norbert Walter, of the Deutsche Bank Group, said that the euro was working very well. The Governor of the Bank of England also told us that the evidence is that the euro,
	"has been working pretty well".
	I was particularly interested in the evidence from member states at paragraph 86 of the report that membership of the euro had helped them to withstand shocks, as referred to by the noble Lord, Lord Barnett. The Belgian Government, for example, considered that their membership of the single currency had smoothed the shock of the recent crisis caused by dioxin contamination of part of the food chain. They said that,
	"had it not been for the euro, both the exchange rate and interest rates would probably have come under pressure and the consequences would have been felt far beyond the directly affected sectors".
	Similarly, as paragraph 86 states:
	"The German Ambassador said that without EMU it was highly probable that the effects of the Russian financial crisis in August 1998 would have had repercussions in the money market 'and the normal course of events would have been that the German Mark would have gone up and other currencies of EU countries would have gone down'".
	We were also told in relation to this important matter that,
	"German trade unions had calculated that the effect on the labour market would have been the loss of about a quarter of a million jobs".
	So the message is, "so far, so good". But EMU has set sail in very favourable economic conditions. Adverse conditions are bound to occur and even now may be starting to occur. They will often affect different members of EMU in different ways. The disciplines accepted at entry may well prove unacceptable, or at least politically contentious.
	In paragraph 18 of our report, we state:
	"We decided to adhere strictly to our subject of how the euro has been and is now working, and not to allow ourselves to look into the future".
	Of course, future problems usually have their roots in present circumstances. Therefore, it is right that we should examine where those problems may have their present beginnings. For example, differences are already appearing between the Commission and the Irish Government as to how the Irish economy should be handled.
	The significant point that I raise in this context is that Pedro Solbes, the economic and monetary affairs Commissioner, said that member states could not be allowed to pursue whatever tax and spending policies they wanted once they joined the euro. Yet Charlie McCreevy, the Irish Finance Minister, said that the idea of Brussels lecturing the EU's best performing economy would be greeted with amusement. There does not appear to be much agreement there.
	Incidentally, Mr Solbes claims the authority for his action as being, not the Maastricht Treaty, but Article 99 of the EU treaties, which presumably already affect this country as well. I wonder whether the Minister agrees with his comments.
	In my view, the position was well made by Mr Jim Power, the former head of economic research at the Bank of Ireland (paragraph 32), who said:
	"First and foremost EMU was a victory for politics over economics. It is a political project. The economic realities are not always logical. I think that is particularly the case for the Irish economy".
	That leads me directly to paragraph 169 of our report, which states:
	"The will to create the euro was political. Its future must equally depend on the continuing political will to create success. The problems that will arise on enlargement and future changes in the Common Agricultural Policy are obvious difficulties which will test that will".
	To my mind EMU and the single currency were started far too early. In a free society, a single currency has successfully been adopted by a number of states only after the necessary political cohesion has taken place. The history of the US, for example, has been much quoted. Yet such history sets no precedent for the creation of the EMU. In that case, former colonies with the same background of local government, the same language and the common political ties inherited from colonial days, formed a secure foundation for the creation of a single currency. However, in the case of EMU, the political will to achieve lasting success must overcome many more difficulties.
	On the hopeful side, the evidence as to the continuing political will is reasonably encouraging. The Governor of the Bank of England said that in making their terrific--he used the word "terrific"--efforts to meet the criteria many countries had,
	"introduced a greater degree of discipline into their fiscal and monetary policies".
	Ms Bettina Schulz, of the Frankfurter Allgemeine Zeitung, considered that in Germany the SGP had forced the government to reduce its deficit and its debt and had accelerated structural reforms; even labour reforms were started.
	However, too often my experience of EU affairs has been that the difficult practical problems--the nuts and bolts--of any project are always swept under the carpet in favour of the big idea itself. I believe in travelling hopefully, but not blindly.
	What are the tests that face a continuing political will to create a lasting EMU? First, one must establish just how far national sovereignty has to be sacrificed to secure a successful common currency. Secondly, the one-size-fits-all monetary policy of the euro-zone is only now being tested. The Irish situation is the first of many that will test the successful working of the system. Thirdly, there are substantial problems affecting the political relationships of member countries that must be resolved.
	As our report makes clear, two of those problems are the terms of enlargement and the urgent need to change the CAP. In my view, a failure of will to meet those tests must seriously weaken the chances of a lasting success for the euro. The quicker that the Council of Ministers faces up to the solution of those problems, the greater will be the chances of that success.

Lord Cobbold: My Lords, I want to add my voice to those who have commended this report. It is an excellent document, full of interesting detail. It contains a broad spectrum of views from those who gave evidence, combined with balanced conclusions.
	As other noble Lords have pointed out, the essential dilemma, to which only the future will supply answers, is whether the one-size-fits-all interest rate can survive the effects of the inevitable future economic shocks without a central budget to counteract those effects. That is the main political risk. The business and financial market arguments seem to be unquestionably in favour of the euro.
	The initial weakness of the euro, which surprised those of us who expected it to be strong--of whom I was one--is explained by the huge attraction of the economy of the United States in recent years and by the massive consequential capital flows into the US dollar that that has engendered. Such flows have delayed the balancing adjustments in international reserve portfolios that I and others believed would make the euro strong initially. But the weakness of the euro, as the noble Lord, Lord Renton of Mount Harry, has pointed out, has benefited the euro-land economies and has helped them to emerge from relatively sluggish circumstances and high unemployment, which a strong euro might have delayed.
	Now the situation appears to be changing. The US economy is less attractive and the euro-land economies are showing reasonable, steady growth. As capital flows start to unwind, the euro is beginning to increase in value against the dollar. The government bond market in Europe is already larger than that in the United States, but the most exciting development has been the growth of a corporate bond market in euros. Although still much smaller in total than the US corporate bond market, and despite the turmoil of the past few months, the fact remains that, although down on 1999 levels, the volume of issues in 2000 was three times that of 1998.
	The situation is much less rosy in equity markets, where rationalisation is still in full swing. Stock exchanges are fighting with the rapid advances in electronic trading systems and are uncertain how best to cope with the huge potential of the market for equities in euro-land. They are also battling with the still widely different regulatory environments that exist within the so-called single market. This is an area of great potential. Big changes can be expected and must take place in the coming months, especially as the focus of global investment is less concentrated on the United States and the attractions of euro-land become more real. As Europe's principal financial market place, the UK is rightly playing a very active part in this process. But our non-participation in the euro could increasingly work to our disadvantage, not to mention the huge extra stimulus to the development of the euro as an international currency that would follow from the inclusion of the pound sterling within the euro.
	With the introduction of notes and coins, 2002 will be a critical year for the euro. Much will depend on how the citizens of euro-land react to the euro when it hits their pockets. I have French friends who still talk about ancien francs. Will the French consumers take to the streets and make euro bonfires of the new notes, or will they welcome the new currency and benefit from the transparency that it will bring? Their reactions will be critical to the response of people in this country and to their appetite for joining.
	There is still a lot to play for, and there is much uncertainty and excitement ahead. However, as this admirable, interim report concludes, I believe that the euro has been a success so far.

Lord Bruce of Donington: My Lords, when I first saw this report, I thought that the Select Committee would quite impartially have addressed the question whether or not we should join the euro, but would objectively have studied whether the existing euro set-up was working satisfactorily. It seems that I was unusually innocent in that thinking. Most of today's speeches have not followed the edict set out at the beginning of the report. As it is obvious that in some cases it has been forgotten, perhaps I may refresh your Lordships' memories. It states:
	"This Report does not consider whether, or in what circumstances, the United Kingdom should join EMU; it is intended rather as a contribution to the debate on whether the single currency has so far been--to use the Government's word--'successful'".
	Anybody listening to today's debate might think that none of them was involved in the report. The speeches that we have heard today have been unequivocally pro-euro and thinly disguised--I say "thinly" because your Lordships are always polite--as an attack on the eurosceptics.
	I turn to the report to illustrate the point that I want to make. It is no ordinary report. It consists of 222 pages, comprising approximately 100 pages of text and 127 pages of evidence. It contains a very large number of tables of statistics--43 in total--and no fewer than nine tables in the text itself, to which I may later refer. It is quite a formidable document. The noble Lord, Lord Renton of Mount Harry, said that the report would be clear to citizens, and my noble friend Lord Barnett said that the report would commend itself to objective readers, whatever those terms may mean--

Lord Renton of Mount Harry: My Lords, I am not aware of having said anything of the kind. I believe that I said it was clear to citizens. I approve of the report. I served on the sub-committee that produced it, but I never said the words that the noble Lord has just mentioned.

Lord Bruce of Donington: My Lords, the words used by the noble Lord were, "clear to citizens". We shall see it in Hansard tomorrow. In the mean time, the total cost of the document, which will obviously appeal to the broad, general public, particularly those in gainful employment, is £20.30. I do not know the intended circulation of the report, or to what extent it may be claimed that it will be read by the mass of the population or is likely to impress the mass of the population, but it has not even very much impressed the press, to whom, presumably, complimentary copies have been sent. The report has, of course, been considered by those with the resources to acquire it, who do not comprise the bulk of the population either in Britain or in Europe. It has also been read and understood by a comparatively few trained economists, including econometricians for good measure, and by the business community. Those citizens of the United Kingdom have had the opportunity to see and understand the document.
	There are precedents for this. One recalls that Ministers of the Crown do not always read the treaties that they sign. That was the case with the Treaty of Maastricht, when the noble Lord, Lord Hurd (as he now is), together with the then Chancellor of the Exchequer, admitted that he had not even read the treaty. Anybody who for one moment thinks that Ministers of the Crown read these reports is barking up the wrong tree. I probably would not include my noble friend Lord McIntosh of Haringey, who will wind up the debate and whose neutral stance I, unusually, support.
	I turn to the report itself. At page 7, the report states in its conclusions:
	"Less than two years have passed since it was introduced, on 1 January 1999. Euro notes and coins will not start to circulate until 1 January 2002, and most of the general public will have little opportunity to judge how the euro affects their lives"--
	You can say that again! The report continues,
	"and to reach conclusions about the success of the euro until some time after that. Even where deep-seated structural and macro-economic changes have begun, it is too soon for their full effects to be felt".
	The euro has not been introduced in a vacuum; it must function within other political and legal frameworks. Those are set out in the stability and growth pact and in various other sections of the Maastricht Treaty. That seriously inhibits the action of member states within the euro and some outside. Does anyone believed that the ordinary people of the country are likely ever to be in the position of being able satisfactorily to judge the real impact of what is happening?
	As is always the case when such complex issues are raised, there is a mass of statistical information. Indeed, 20 per cent of the report comprises tables of statistics which will not be intelligible to the ordinary people who inhabit the country. They will have to rely on second-hand opinions. Furthermore, there are some 43 pages of statistics from the Government's database and I have no doubt that sooner or later they will appear on a website. We know that the statistical material emanating from computers is not always permanent. Often, it is completely recast. There have been a number of cases in the United Kingdom in which millions of pounds have been spent on computer programs and print-outs which have subsequently proved to be inaccurate. The same thing applies to the statistics which are quoted with authority in the report.
	It is no good for us to proceed on such a basis. There is no point in trying to dazzle people with the figures and arguments as they are currently presented. We know in advance that business and large commercial interests will be in favour but the public will not be sure unless a detailed and impartial presentation of the situation of Britain within the euro and outside is made to them in a manner that they can understand and appreciate as being fair. Until that is done, such reports will do no more than touch the periphery of opinion in this country--and mainly professional opinion at that.
	It is already clear--it is clear even in the report--that the imposition of a single currency throughout Europe will not succeed for the simple reason that it will automatically impinge on the lack of ability to vary exchange rates and interest rates. That will deal a fatal blow to the expenditure plans of all governments. Only through government action can the lot of poorer people--the great mass of people in Europe--be articulated.
	Such articulation stands no chance but it could not be put in words better than those used by M Trichet. It will be recalled that in a complete breach of the treaty M Trichet was appointed in advance, outside the scope of Protocol No. 10 of the Maastricht Treaty, in order that he could take over from Mr Duisenberg the leadership of the European Central Bank.
	It is most interesting, therefore, to see exactly what he said about the position that would be likely to arise. In evidence to the committee, M Trichet said at page 38:
	"One of the observations we are also making is that in general it seems to us the level of public spending as a proportion of GDP is too high and should diminish and the best way to be on the safe side in terms of fiscal policy is to attack directly the question of public spending. In that respect I can mention that the euro area has received recommendations by the Eurosystem that are going exactly in that direction: let us diminish public spending as a proportion of GDP; let us try to have a fiscal situation that will be as sound as possible in all respects, including the one that you have mentioned".
	M Trichet is due to take up leadership of the European Central Bank.
	The attacks on public expenditure remain the settled polity of the European Commission. Sooner or later, the people of Britain will know that the only way of redressing their position as against those of the rich and powerful who govern will be progressively to bring pressure for more expenditure on public and other services in order that the yawning gap between the rich and the poor can partially be narrowed and suffer no further deterioration.
	In that light, I commend the report to the House. Had I time, I could mention many more niceties within it. I hope that it will be appreciated and I sincerely trust that, despite its supporters here today, it will receive a wider circulation than has been the case.

Baroness Sharp of Guildford: My Lords, I speak from these Benches as a member of the sub-committee which helped to write the report. As the noble Lord, Lord Bruce, noted, the report is substantial, although when we began our deliberations the inquiry was to be a short sequel to the earlier report by the sub-committee on the European Central Bank. We regarded this subject as appropriate to fill the overspill period before the gracious Speech. As it turned out, the exercise was very much more substantial than originally envisaged.
	The report is extremely useful from many points of view. I reassure the noble Lord, Lord Bruce, that the report may cost £20 but it can be downloaded from the Internet, which many university students use to obtain the report. I believe that your Lordships' reports are used extensively by universities in this country. Certainly, speaking as someone concerned with the economics of science and technology, the reports of the Select Committee on Science and Technology were regularly used by both me and my students.
	When we embarked on the exercise we recognised that it was too early to take any definitive views on what would happen to the euro because the period was still very much a transitional one. The European Central Bank had been set up and a single interest rate covered the euro 11, now the euro 12. Big business used the euro for the purposes of trade and the financial markets in the euro picked up and developed in a substantial way, as the noble Lord, Lord Cobbold, mentioned. But if one visited any country in euro-land one would find that people still used local notes and coins and, although prices were quoted in euros, most still thought in terms of local rather than euro prices and the euro meant very little to them.
	Above all, when we tried to take a view as to how the euro was working and looked at the statistics--we spent some time pouring over pages of figures produced to us--we had difficulty in distinguishing the effects of the euro from the general upswing in the macro-economic situation within the Union. Undoubtedly, the recession of the early 1990s, which Germany and France hit somewhat later than the UK--therefore, they went into recession later--had been extended by the build-up to the single currency and the stringent demands placed on many countries by the stability and growth pact. Nevertheless, we believed that it was useful to flush out what was and what was not available and look at the evidence.
	The first issue was what criteria should be used to judge how the euro was working. What does one mean by "success"? On page 7 of the report one finds a very long list of issues that can be used to judge success. I very much liked the approach of Sir Edward George, Governor of the Bank of England, who said clearly that it should be judged by its performance. He went on to point out that growth was up, unemployment down and inflation, given the rise in oil prices, surprisingly stable. He summed it up by saying:
	"Basically ... it is actually not at all a bad performance; in fact, it is quite a good performance".
	The problem in performance that Sir Edward George saw was the one that we all witnessed: the fall in the value of the euro. The general public, certainly in this country, asked what was wrong with the euro and why it had dropped so substantially against the dollar. As other speakers have made clear, Sir Edward George said that he did not think that that was the result of the fundamentals of euro-land but the extraordinary outward flow of both direct and portfolio capital from euro-land in particular, but also the UK, into the United States. He believed that the cause was the imbalance across the Atlantic rather than across euro-land. It is interesting that, as the noble Lord, Lord Tomlinson, noted, the glamour of the dot.com economy, which in part pulled in this money, has faded since the time the sub-committee took evidence from the Governor of the Bank of England. One now sees some rebalancing of the two currencies of which Sir Edward spoke. I found that a particularly interesting exercise.
	In the early and mid-1990s I had been somewhat sceptical about the development of the euro. I accepted that it could be seen as the logical conclusion of the single market project and that there could be problems if within that single market countries began to adopt competitive devaluation positions. In particular, I recognised that Germany had fears about Italy and Spain, even the UK, using devaluation as a means of positioning themselves more favourably in the market. But I have also spent much of that time studying the underlying competitiveness of European countries, in particular the relationship between the less advantaged and more advantaged countries in the EU-- "cohesion" in euro-speak--and the divergence and convergence among those economies. As a result, I was well aware of the divergence between different parts and regions of the European Union. That led me to conclude that the single currency project needed to be taken slowly rather than too quickly. I believed that the more important project politically was enlargement in order to bring in the countries of eastern Europe rather than the single currency.
	But I am a political as well as an economic pragmatist. Once it became clear that the all-important axis of France and Germany was determined to press ahead with the single currency, and therefore it became a political project, I believe that Britain would be ill advised not to participate. It was important that if it went ahead we should make it as successful as possible and that we would do better--as in 1958--to be at the table at the beginning helping to shape it rather than come along as a Johnny-come-lately asking people to change the rules.
	At that stage I was very interested to see how it was shaping up. Two particular issues influenced me in becoming far more optimistic about the project than I had been earlier. One was the fact that the effect of price transparency was much stronger, even at the early stage, than had been expected. Several witnesses spoke about the degree to which, even before the introduction of notes and coins, consumer prices had been pushed down as a result of everything being priced in euros. That important matter had been noted by Ireland in particular, but it also emerged from other witnesses.
	Over the past 20 years in this country we have suffered from the collusion between retailers and manufacturers in the car market to keep prices somewhere in the region of 20 per cent above those in the rest of euro-land. To some extent, the development of single pricing in the European Union is one of the factors which exposes that collusion and gives the Government, as well as the EU competition authorities, something of a stimulus to do something about it, whereas before they turned far too much of a blind eye to it. The issue of consumers benefiting from transparency of prices is of considerable value. If it already exists at a time when we are not using the notes and coins, how much greater it will be when we have a single currency.
	The second interesting issue is the stability and growth pact. It has been mentioned that Belgium and Finland both talked about the advantage to their administrations of the stability and growth pact in terms of providing a degree of external discipline to goverments. I had expected Italy to find life within the euro difficult. In my studies I worked fairly closely with a group of Italian economists. I asked them: "What are your views? How are things working out in Italy in relation to the single currency? Are you being pressed too hard by the stability and growth pact?" A tall man--I confess they were all men--relied: "No, Margaret, you must understand this has been of enormous value to us. At long last we have some external discipline on our government that actually reins in public expenditure. No, it has been tough meeting the criteria but it has very definitely been worth while".
	I conclude that I have been influenced by a number of issues, but these are two issues I highlight as being a slight surprise in the evidence that we found. The noble Lord, Lord Shaw, made the point that so far we have seen the euro working at a time when the economy is moving forward quite fast. It is important in the sense that trying to make changes within the economy is rather like trying to change gear with derailleur gears: as long as you go forward you can change gear quite well; it is when you stop that the chain falls off.
	That is a test still to come. But my reading of the evidence that we received was that the euro has made a good start. Given the confidence that is now being built up in the euro, and given the reassertion of its fundamentals against the dot.com economy of the US, I am fairly confident of its future.

Lord Peston: My Lords, this is an excellent report. I shall not waste time listing everything with which I agree. Instead I shall concentrate on some points of contention. That is less to do with the committee's report and more to do with the precise form of EMU itself.
	However, I should tell your Lordships--other noble Lords have done so--where I stand personally on EMU. I use the language so beloved of my right honourable friends in government; namely, that it is in our national interests to join economic and monetary union. The net economic gain is as clear and unambiguous as anything in economics is or is likely to be. That is my position.
	The noble Lord, Lord Shaw of Northstead, said that it all started too early. He must know that this matter goes back some 40 years. I certainly started to get involved in it in the early 1960s when people were thinking of it as both a theoretical and practical project. I certainly talked to the noble Lord, Lord Jenkins of Hillhead, when he was president of the Commission in 1975, about the practical prospects then. Far from being too early, this should have happened long ago. The other comment that one should make at this point is that, given the history of what has happened, the fact that EMU has started is actually a miracle. To anyone who knows the problems at every stage in moving forward, it is a remarkable achievement of which Europe can be proud.
	I turn to the report. I look first at paragraph 14, again as a point of contention. I do not regard the end of internal competitive devaluation, coupled with differential interest rates, as a potential downside; quite the contrary. The essence of economic and monetary union is that one gives up competitive devaluation and one gives up separate interest rates. That is the point. It cannot possibly be a downside. Indeed, the point of it is the efficiency benefits that will occur in the way the single market is operating in that monetary and micro-economic framework. Therefore, one should not approach the subject in that way. I add that it is a matter of sadness to those of us who believe strongly in the single market how slow we are still being in removing the large number of market imperfections and restrictive practices that remain, both in European Union producer and consumer markets. But EMU will help, I hope, in moving us in the right direction there.
	I turn to paragraph 16. Here I agree with the committee. It says that,
	"the ECB has been more transparent than expected".
	But, as none of us who knows anything about Europe expected it to be transparent at all, anything it has done is more than expected. But it is surely not transparent enough. The ECB compares most unfavourably in this regard, as in so many other ways, with the Monetary Policy Committee of the Bank of England, which is a model of transparency and openness. Therefore, I do not accept that it would be inappropriate for the ECB to publish minutes and voting records. Independence is not, in any way, threatened by so doing or by requiring such secrecy in order for the bank to operate in an independent way. If one really believes that, one has no faith in the European Union in the first place. To say that the ECB would be threatened by normal democratic transparency is a most ridiculous proposition.
	That takes me on to accountability. This is a matter that unites most of your Lordships' House, given our own peculiar way of getting here. Accountability to democratic institutions is the essence of democracy. Here again, the ECB compares most unfavourably with the position prevailing in this country with regard to the Monetary Policy Committee. So far, the European Parliament's role in this has been pathetic. I should like to see it show some courage and start to demand an accountability role.
	I do not see what the problem is--again I slightly disagree with the committee: if it reflected on the point, I am not sure whether it might not come to agree with me--

Lord Dubs: Oh!

Lord Peston: My Lords, perhaps I may finish. I do not see what the problem is in making the European Central Bank accountable to national parliaments. It would do it the world of good and would improve policy-making if it regularly had to explain itself to the Treasury Select Committee of the other place or, even more valuably, to the new economic affairs sub-committee of your Lordships' House, as well of course to similar bodies in other countries.
	The target of the ECB is stable inflation. It refers to stable prices but it always means stable inflation. That is similar to our target. It follows that the external value of the currency is determined by markets given the inflation target and policy to hit it. I am not one of those therefore who believes that it is appropriate, having done that and let markets determine the behaviour of the external value of the currency, to start talking about whether the currency is too high or too low.
	I can only say that we will live to see the same kind of people saying how worried they are about fundamentals compared with the value of the euro being too low. It will not be long before they say that the value of the euro is too high. The answer is that these days, in the free world, markets determine the value of currencies and one should stop all these pronouncements on too high or too low; or, to put it differently, in the usual cynical way: if you know what the price should be, you can make a lot of money by working against markets. I would not advocate that to your Lordships.
	My right honourable friend the Chancellor of the Exchequer got the inflation target formulation correct and the people who set up the ECB got it wrong. As noble Lords will know, the target in this country is a precise number with a symmetric band, and outside the 1 per cent band of the 2.5 per cent target the governor has to write a letter to the Chancellor explaining what he is up to. Setting an inflation target at less than or equal to a particular inflation rate and then saying it is for the medium term is much inferior as a target method of making policy to our method. Certainly, the lack of the equivalent of an explanation is a weakness. I am not happy with the formulation of the ECB's approach to policy and I hope that it may at some time move in our direction.
	I make a similar remark about the stability and growth pact. I entirely accept that one has to have some kind of restraint on fiscal policy. I do not take the arguments of why quite as seriously as my noble friends of all kinds on the committee, but one has to have some restraint as fiscal profligacy could undermine monetary policy. The way in which the stability and growth pact is formulated is extraordinarily unsophisticated. The ECB refers to a deficit of less than 3 per cent and then adds the usual weasel words,
	"in all but exceptional circumstances",
	which get you off the hook if that is what you need. But that fails to distinguish current from capital expenditure, as our fiscal regime does distinguish. It is entirely correct to make that distinction.
	It also assumes that we can easily define the cycle. Our approach assumes it as well and every economist knows how difficult that is. The main point is that capital expenditure should be approached in government budgetary terms differently from current expenditure and should not necessarily be tax financed even over the cycle. If we have stable, democratic and financially sound governments, which at the present time we do have in Europe, I think that then to base fiscal rules on the assumption that they are all stupid is hardly supportive of democracy per se. I hope that EMU will develop so that we achieve a much more sensible stability and growth pact than the one we have at the present time.
	In addition, if the European Union is to evolve, it is by no means obvious to me why the emphasis on the fiscal regime should be on national governments. Different circumstances exist. Why should one national government not run a surplus in order to finance another national government's deficit? There is no problem with the economics of that. In order to get my point across to noble Lords and help them to understand it, I ask them to reflect on the position of a large multi-national company with businesses in several EU countries. Let us suppose that someone were to come to that company and say, "What you have to do is balance your accounts in every country and, in addition, you must not be a net borrower". If one really wanted to bankrupt that multi-national, that is how one would do it. If one applies that rule to a multi-national private enterprise, one should at least reflect on whether it might not also be applied to a multi-country European Union.
	My comment on the insulting document sent to us by the Treasury is that there must be someone in the Treasury who is still feeling bitter about the behaviour of your Lordships in 1911. I hope that the Treasury takes note of the fact that no one in the Chamber and no member of the committee was responsible for defeating Lloyd George's Budget at that time. I really do believe that the Treasury should forgive us. It should put in a little work and take more seriously the enormous amount work that the committee put into its report.
	I conclude by asking and answering four questions. Is the euro working? Answer, yes. Could it work better? Answer, yes. Should Britain join? Answer, yes. Would it work even better still if we joined? Answer, very definitely yes.

Lord Northbrook: My Lords, we are all grateful to the noble Lord, Lord Tomlinson, for initiating this debate and also to the members of the committee, with their vast wealth of experience, many of whom we have had the privilege of hearing during the debate today.
	As usual, the committee has made a thorough and detailed report. I have to venture the opinion that its broadly favourable conclusion has not entirely surprised me, as I have been getting to know over the past year or so on which side of the debate on the euro its personal sympathies lie. It is therefore interesting to see in paragraphs 14 and 15 of the report the committee's few concerns about the euro, which in my belief require a much more detailed inspection. I shall spend a little time on those two paragraphs.
	Paragraph 14 states:
	"But we have noted the potential downside of the 'one size fits all' monetary policy. It has deprived the national governments and central banks in participating Member States of the possibility of adjusting their economies either by alterations in their exchange rates or by differential interest rates".
	Too right, my Lords.
	The report then moves on to paragraph 15 and looks at the position in Ireland. It observes that the rate of inflation has recently been increasing rapidly and that the Central Bank of Ireland cannot respond by increasing interest rates. Let us look at the Irish situation in more detail. Inflation in Ireland is at its highest level for 16 years. It stood at 7 per cent in mid-December. Interest rates should be at a much higher rate than the current euro-land 4.75 per cent to reduce demand in the economy. Maurice Fitzpatrick, chief economist of Chantrey Vellacott DFK, has suggested that interest rates should be around 14 per cent. As a consequence of the high inflation rate, the unions have recently negotiated a 7.5 per cent pay increase from next April.
	Wage price inflation looks to be flourishing in Ireland. In addition, there has been a rapid expansion of credit. By last July it was increasing at the rate of 25 per cent per year. Maurice O'Connell, governor of the central bank, has said that nothing can be done to stem the expansion of credit. He stated:
	"There is no authority to impose restrictions as we might wish".
	A report by PricewaterhouseCoopers in October 2000 stated:
	"If confidence erodes and foreign investors pull out Irish property prices could crash undermining the banking system".
	The IMF has also suggested that monetary conditions are too loose in Ireland. In a report on the Irish economy in August 2000 it noted:
	"Monetary conditions are clearly expansionary from Ireland's point of view contributing to robust demand growth as well as rapid increases in house prices and private sector credit".
	The IMF also noted that monetary conditions, now determined on a European area-wide basis, were excessively accommodating for Ireland's cyclical position. Thus the consequences of joining the single currency are all too clear in the case of Ireland where the inability of the national government to put the brakes on an explosive boom could well lead to economic disaster in the long term.
	Portugal looks to be going down the same route. It is already experiencing the highest industrial inflation in euro-land at 16 per cent. It has experienced a credit boom and a collapse in savings leading to a massive current account deficit. The Portuguese Government have imposed price controls on energy to hold down increasing inflation, but that subsidy arrangement comes to an end this month. Last August, Vitor Constancio, Governor of the Bank of Portugal, warned of the danger of,
	"a spiral of higher prices and wages".
	Traditionally, Portugal has one of the highest saving rates in Europe. This fell dramatically when Portugal became a member of Euro-land and real interest rates dropped. In October 2000, the Financial Times reported an estimate from the head of a large commercial Portuguese investment bank, Mr Tavares Moriera of Central, that household debt had tripled in five years to reach 90 per cent of disposable income. He feared that:
	"Interest rate adjustments next year may push many households over the brink".
	As a result of the credit boom, the current account deficit has ballooned from 4.7 per cent of GNP to 12 per cent in 2000. In October, the economic situation caused a political crisis.
	Thus we see how in two European Community countries the euro is causing severe economic problems. What is more, its weakness over the past year or so has enabled larger countries like Germany and France to avoid wholesale economic reform, in particular of labour markets, as my noble friend Lord Renton of Mount Harry pointed out. This would also help euro-land to escape from high structural unemployment. Last October in Germany, Hans Henkel, the then head of the German CBI, stated:
	"In the past, we have been good at exporting the strong mark. We should not have to rely on a weak euro to help us".
	He also stated that the government's lack of urgency and commitment to modernising the German economy were now very worrying.
	The German Government have recently increased the burden of labour regulation. Three new regulations extend employee representation in the workplace, reinforce employees' right to work part time and restrict the fixed-term contracts used by many companies to improve their labour flexibility. Economics Minister, Walter Muller, accepted that the new rules might scare off small and medium-sized enterprises. The new president of the German CBI has stated that unemployment could be halved if labour regulation were reformed.
	In France, much the same situation exists. Starting in 2002, the government have decided to impose a 35-hour week on even the smallest firms. Lucien Rebuffel, the head of the CGPME, which represents over 1.5 million small firms in France, said that the 35-hour week was,
	"complex, rigid and what's more of little use when creating jobs".
	He added that no other country had decided to go along that road and this clearly means that French companies will face a serious handicap when it comes to increased costs.
	The French Government have also proposed that workers on fixed-term contracts be paid over 10 per cent more than workers on open contracts to encourage companies to take on workers with full employment rights. The French CBI has said that it is hostile to this proposal, believing that it shows a major lack of understanding of the way modern business works.
	The European Parliament has strongly resisted economic reform. The parliament has voted to pass amendments to the takeover directive which would make hostile takeover almost impossible in Europe. The amendments were proposed by a group of German MEPs concerned by the hostile takeover of the German firm Mannesman by the British company Vodafone. It also voted for the early imposition of a tax on art sales, which could weaken the European art market. Furthermore, it voted down postal liberalisations.
	The most serious long-term problem facing euro-land is unfunded pensions. Whereas citizens in the UK have nearly fully funded their future pensions liabilities, this is not the case in continental Europe, where a "pay as you go" basis is the norm. A study by Niall Ferguson and Laurent Kotlikoff in the publication Foreign Affairs in March 2000 found that in order to fund pension commitments, Italy will have to raise taxes by 10.5 per cent, Germany by 9.5 per cent and France by 6.9 per cent. These figures are with effect from today's levels the immediate and permanent adjustment needed.
	What is the attitude of these countries to pension reform? In France, pension reform was dropped in March 2000. The Prime Minister, Lionel Jospin, has stated that he does not believe that "pay as you go" should be replaced by the UK system. In Germany, pensions reform is under threat with large-scale union demonstrations against the planned reforms of the labour Minister, Walter Reister. Why is this pension problem so interconnected with the euro? A common currency would inevitably lead to a common taxation system, despite recent denials. Comments from a senior aide to the German Chancellor (made after a recent meeting with Tony Blair) confirm this. He said:
	"Those who are in euro-land quickly feel the direct obligation that you cannot have the one without the other. You cannot have a common currency that is not embedded in a common and appropriate fiscal and economic policy".
	Hence the very real probability that the UK will end up, through its net contributions, funding European pensions.
	In concentrating on the major problems of the euro, I should like to emphasise that the UK can be part of the EU without joining the single currency. The predictions of politicians and many commentators were that the euro would be strong from day one, I should, however, declare an interest as a manager of an investment trust where we decided to go short on the euro right from the start. I should like to end with the three reasons for doing so, where we forecast the likely unfavourable progress of the euro against the dollar. First, time. Some 135 years have elapsed since the end of the American Civil War. The dollar was fused at the end of it. On the other hand, the euro was cobbled together in only a few years. Secondly, common language. In the USA, this makes mobility of labour much easier than in the EC. For example, a Greek citizen emigrating to Wales or an Italian to Denmark will find it much more difficult than an American moving from one state to another. Thirdly, economic convergence. The examples of Ireland and Portugal show the problems, whereas in the US, economic variations between the different states can be ironed out by market forces.
	Perhaps I may ask the Minister how he believes that these problems can be overcome.

Lord Lea of Crondall: My Lords, perhaps I may say right at the start that those of us who served on the sub-committee are extremely gratified by the range and depth of consideration which other noble Lords have given to this matter. I hope that we can do justice to those contributions in the remarks that some members are now able to make.
	In debating at this time the question whether the single currency has so far been successful, there will be those who will wish to quote Chou en-Lai, who, when asked what he thought of the French Revolution, replied that it was too early to judge. But to leave it there would of course be untenable for several reasons, not the least of which is that, since 12 countries have taken the plunge, our jobs and investment are starting to be affected. Certainly, investment is in many cases predicated on Britain joining.
	Our witnesses assisted us in defining the criteria by which we would measure success. To that end, I should like to put a question to my noble friend on the Front Bench: does he agree that we have set out a reasonable list of criteria on page 7 of the report, even though we cannot mark out of 10 the Treasury's response this afternoon? Our analysis of the evidence in relation to these criteria is the heart of our report. For the record, there is the conclusion--also on page 7--that,
	"Clearly there has been considerable progress in relation to some of the criteria, but less in relation to others".
	That will not exactly set the Thames on fire, but if someone from Mars were to mark the answers out of 10, he would probably conclude that the euro was doing fairly well on seven or eight out of 10. As has been mentioned, that is, of course, broadly speaking, the overall assessment of the Governor of the Bank of England.
	Another broad impression, which we do not spell out in so many words, is that the whole process since Maastricht--which was, of course, 10 years ago--has been one of very careful preparation and of very careful work on conditions and procedures, stability and growth factors and so on, for this project to be a success. That careful preparation has undoubtedly paid dividends.
	Nearly all the witnesses gave the rationale, the logic, that the fruition of the single market is a single unit of account, a single currency. They implicitly reject the position, if I can sum up in a slogan, "single market yes, single money no". They think that is an illogical position.
	My noble friend Lord Peston touched on the question of accountability and unelected central bankers, and I shall refer to one of the many interesting remarks that he made. I used to share the view expressed by the noble Lord on the publication of voting. However, the very clear view arising strongly from the evidence was that a particular difficulty arose from the fact that the board consists of one member per member state. If votes were recorded, members would be lobbied and they would be different kinds of animals from the animals they are now. They would find it much more difficult to do what my noble friend Lord Peston says they should do--that is, vote according to their own judgment--if they were to be more openly lobbied by their own governments.

Lord Peston: My Lords, perhaps I may interrupt my noble friend. I hope that he fully appreciates what he is saying. He is saying that these major figures from each of the countries would find, if they had to express their views in public, that they could not behave honestly. That is the position. It is an appalling reflection on the behaviour of the ECB and the European Union if we have to live with that view. I am simply saying that I do not want to live with that view.

Lord Lea of Crondall: My Lords, I knew that that would be the counter argument. I do not think that it is quite as devastating as my noble friend said. After all, we could have a totally different kind of central bank--it could be run, like the Bank of England, through a monetary policy committee--but if we have this system we have this problem. We have a similar problem with the European Court of Auditors, which also consists of one member per country. This is a great step forward and we have to look at the issue in an objective way and not use emotive language about the motives of people. If we are not careful, that will be their behavioural response. I hope that it is now on the record that that is the logic, the reasoning, for the view expressed.
	Perhaps I may now say a word about sovereignty. On page 103 of the report the German ambassador quotes the following remark of Paul Henri Spaak more than 50 years ago:
	"In Europe there are only small nations left, those that know they are small and those that do not".
	Some may think that is pushing it a bit, but it is an arresting and fundamentally accurate analysis. If one looks at a world of 5 billion or 6 billion people and at the accelerating development economically in China and elsewhere, one finds that Europe, with a population of some 500 million, has a maximum of 10 per cent of the world's population. In a world of globalisation, Europe is just about large enough to have some leverage in the WTO and elsewhere.
	So what about the proposition that the euro is, to quote another phrase on page 46 of the report, "a currency without a country"--which is almost the converse of the previous question? That is one of a number of propositions which are somehow true ex hypothesi and do not enter into other than a definitional state. The same is to some extent true of "one size fits all" rate of interest, an issue to which I will return in a moment.
	We can agree that it is a great leap forward--if I may quote Chou en-Lai twice in one speech. Future historians will probably see it as an act of faith at least as great as the establishment of the EEC in the first place.
	As to the rate of interest, the objection that different degrees of capacity utilisation require different interest rates is, of course, as my noble friend Lord Barnett, pointed out, as arguable between London and Cardiff as between London and Brussels. The greater difference is, of course, between London and Cardiff. Indeed, typically there are far more variations of capacity utilisation within countries than between countries.
	Noble Lords will be interested to know that we spent a lot of time considering the issue of so-called asymmetrical shocks, whereby a particular member state is affected quite differently from the others by an external shock. The more we looked at this the more we found it to be, in practice, overstated. Finland was cited as an example of where such circumstances may be a factor because of its proximity to Russia. We heard about an interesting innovation in Finland--the social security buffer fund, which is referred to on page 23--whereby the flexibility in labour costs of any asymmetrical shock does not have to be in wage costs per se but in total labour costs. I was very pleased that my former trade union colleague in Helsinki gave that evidence.
	Other noble Lords have dealt more than adequately with the questions of the euro's value against the dollar and Ireland, so I should like to skip those issues and say a few words about the problem of public opinion. We perhaps did not say enough about this in the report, although it is mentioned on page 48.
	Here I should say a word of caution about the reaction on the streets of Dusseldorf--and this goes also for the streets of Burton-on-Trent. It is not axiomatic that we can visualise, as the noble Lord, Lord Renton of Mount Harry, said, the deregulation of labour markets as a general proposition. At a time of accelerating structural change, we need more labour consultation and protection on some matters as well as updating technology and working practices in other respects.
	The difficulties of convincing public opinion, the man and woman in the street, are exacerbated if there is loose talk about deregulating labour markets. For example, deregulating pensions? No. The opposite is required on the agenda. Deregulating holidays? No. We have now agreed a minimum of four weeks holiday and that has massive advantages. What about deregulating standards of training? No. Everyone who has studied the matter in any detail knows that the opposite is true. Deregulating European works councils? No. They are rightly about to be strengthened to help with the restructuring of the European economy. What about deregulating maternity leave? No. That is part of an active labour market. I could go on.
	Of course, there are structural changes that require changes in arrangements in the labour market. But the man and woman in the street, in Dusseldorf and in Burton-on-Trent want a prosperous Europe that is also seen to protect their welfare--and if there is an increase in welfare to be had out of all this, why not?
	I ask the noble Lord, Lord Northbrook, whether he is aware, when criticising the framework agreement on part-time working and on fixed-time contracts, that this was done by means of a collective framework agreement with the BDI, the German employers, and with the CBI in London as the alternative to a detailed directive. The reason they signed the agreement was that they want to see an agreed role for part-time work and fixed-term contracts as part of the modernisation of the European labour market.
	What was the issue in Denmark? The first point was the clear gender gap--with a 10 per cent deficit among women, mainly motivated by anxieties about the future of the welfare state, maternity benefits and so on. To use traditional trade union rhetoric for once, is this a project for bankers, or a project for the people? I say that, if we have to choose, it is a project for the people. But I say to noble Lords: please do not let the issue be posed in such a way. The art of politics is surely to give people an acceptable vision of their role in society. European trade unions have been working hard to adjust to EMU, recognising that European benchmarks for pay and productivity are now more transparent; they will be more so with the introduction of notes and coin. We refer to the matter on page 22 of the report.
	So let us maintain a sense of balance on the question of labour markets. It is an important area so far as public opinion is concerned. We shall be negotiating pay in euros. We shall need confidence in the prices index, and in the price tags in the shops. We shall hear a great deal more about this matter in the coming months.
	I have the impression that the fashion in what is said about Europe is changing once again in a more positive way. Few now deny that the introduction of the euro is creating the most radical and far-reaching shake-up since the immediate post-war period. We see mergers and all that is associated with this type of restructuring, and we see the extra transparency of the currency itself with the notes and coin at the end of the year.
	In conclusion, I ask my noble friend Lord McIntosh this question. Does he agree that there is scope to explain all these matters more adequately in this country--not at a level of high polemics, but systematically, possibly under the 10 headings that we have set out? Perhaps I may make a suggestion to my noble friend. As some recompense for the sins of omission of the Treasury, should not the Government publish a popular version of our report, with a joint foreword written by the noble Lords, Lord Bruce of Donington and Lord Tomlinson?

Lord Hooson: My Lords, I agree with the noble Lord, Lord Lea of Crondall, who disagreed with the noble Lord, Lord Peston, over the idea that the European Central Bank should publish the minutes, and therefore the voting pattern, of its members. I never thought I should live to see the day when I should accuse the noble Lord, Lord Peston, of being naive. But if ever there were a recipe for disagreement in Europe, it is to publish the minutes of the bank's decision. It would invite pressure on individual members, no doubt from the nationalistic elements within their own country.
	I have no expertise in this subject; however, I have a great deal of interest in it. The report is very important, and for this reason. I have often been dubious about certain values in this House--for example, whether Question Time is really valuable. But when a committee of this kind goes into a subject in depth, it makes one of the most valuable contributions that this House can ever make. The report is important in that respect.
	The report gives those of us who do not have the expertise an appreciation of the attendant progress and problems of the euro. That progress greatly affects our political and economic outlook for the future. I read the report first; then read the evidence, which I found fascinating. An enthusiasm on the part of the witnesses came across, even in detached witnesses, such as the Governor of the Bank of England, who gave a correct appreciation of the benefits of the euro, the problems involved, and so on. The noble Lord, Lord Bruce of Donington, who is not in his place, referred to the costs of the report and said that very few people had read it. He said that the press had not taken it up the following day. Like so many people in this country, I am fed information on the euro which is entirely misleading. The press barons working from America who largely control our press have very little interest in presenting a detached report such as this. That is also why it is so important.
	Previous speakers have indicated their approach. I make no bones about the fact--and here I agree with the noble Lord, Lord Bruce--that my approach is political. I think that the whole movement towards a European Union is political. It will be a remarkable achievement, after the wars of the last century--a united Europe, with a population of between 300 million and 500 million depending on which countries join. To achieve that objective, which would bring such security to the world and make an enormous contribution, requires a successful economy. The way to achieve a successful economy is through free trade throughout Europe, and through the organisation within Europe of a sound economy. That is essential. Also, for a single market, a stable and dependable common currency is an obvious must.
	In political terms my view is that the Government, when they were elected and when the Prime Minister's popularity was at its height, should have taken the plunge and entered the euro then. I think that it was a rather mean approach to say that we shall join the euro only when the other countries have proven to us that it is a success. Obviously, this country could have made a great contribution to its being a success. I well understand the argument that the time when we should join the euro is largely governed by economic considerations. But the question of whether to join cannot depend simply on an economic assessment. It depends on a political assessment.
	I should like to comment on two or three points that emerged clearly in this fascinating report. First, I have the impression that everyone generally was pleased with the progress of the euro and the performance of the European Central Bank. The gentleman from the Economist said in evidence that it was held in reasonably high esteem. That is a fair assessment. But all the witnesses conceded that the real test as regards assessing confidence in the euro was when it demonstrated how it would deal with a recession, especially one with high unemployment--in other words, when the euro economies had been through a bad period.
	Secondly, there was considerable emphasis on the strong performance of the US economy. There was little thought then on the part of the witnesses that there would be a downturn in the United States economy. Therefore, already, to a degree, the evidence given and the assessments made by the committee need to be qualified by what is happening now in the United States. The one exception was, I believe, Professor Fitzgerald who gave evidence on behalf of the Irish Government with the Irish Ambassador. The professor laid great emphasis on the relationship between the Republic of Ireland and the United States of America and between the Republic of Ireland and this country, with regard to the proportion of trade that they enjoyed. He appeared to be scared of a sudden decline in the value of the dollar and a sudden increase in the value of the euro and of the problems that that could cause for the European Union generally and for the Republic of Ireland in particular. That is a possibility. One hopes that, as a result of combined efforts on both sides of the Atlantic, the rapid changes in value which he feared will not occur.
	Professor Fitzgerald pointed out that sterling very much shadows the dollar and that if there was a sudden decline in the dollar it would hit sterling hard, just as it would hit the Irish economy pretty hard. He dealt with the problem of a possible decline in the global economy. Everyone will be affected if the measures taken in the United States do not prevent a decline in the American economy descending into depression.
	I have friends in, and a fair knowledge of, the two peripheral countries of the 12 that are mentioned, Ireland and Finland. The problem of inflation in Ireland largely comprises asset inflation. Property has risen in price enormously. I had a friend in Ireland who died two years ago. He had been a friend since the war. His children phoned me to say that they had to put the house on the market. They mentioned an asking price which I considered would be high for the South East of England. I was told that within two days of it being put on the market it had been snapped up by an American. There is so much direct investment in Ireland for a number of reasons.
	Ireland has joined the euro and is a wholehearted member of the European Union. It is the only other English speaking country in the European Union and it is a pleasant country in which to live. American businessmen have discovered that they can run a business in Europe just as well from the Republic of Ireland as from the South East of England. That has added to the boom in the Irish economy. That boom incidentally has probably contributed more than anything else to the change of atmosphere in Northern Ireland that makes a political settlement there a possibility.
	I refer to a problem which will lead to great political difficulties in the coming election. Labour is imported from Wales into the Republic of Ireland on a weekly basis. Irish firms must constantly increase their wages to attract people to work in Ireland in the many jobs that are available there. I do not have to remind your Lordships of the great decline in the prospects for the Welsh economy. The contrast between the prosperity of Ireland and the lack of prosperity of Wales will become a real political issue in the coming general election. I imagine that the same thing will happen with regard to Scotland. It appears to me that the Government sometimes do not fully appreciate how close our country and the Republic of Ireland are.
	Until I retired last year I was the chairman of Severn River Crossing Plc, which is one of the main arteries from the Republic of Ireland into England through Wales. That company has already made arrangements to accept the euro in payment of tolls from the start of next year. Many other businesses have also already made such arrangements. By 1st January next year when the coins and notes are in circulation we shall see a tremendous change in the attitude towards the euro in this country. I believe that the Republic of Ireland will have a soft economic landing from its inflation problem for a variety of reasons which I shall not go into now.
	Like the Republic of Ireland, Finland worries about the American economy. If the American economy went into decline, and Nokia, the big electronics company in Finland, which is now entirely owned by Americans, were closed down or manufacturing moved elsewhere, that would be a great blow to the Finnish economy, irrespective of its position with regard to the euro. For we are really talking about a global economy in which the dollar is an important ingredient and the euro is an increasingly important ingredient. Looking ahead, people surely will one day talk of the merger of the dollar and the euro.

Lord Plumb: My Lords, as another non-member of the committee chaired by the noble Lord, Lord Tomlinson, I congratulate him and his team on a positive report on the working of the euro. For the first time ever in this Chamber I congratulate the noble Lord, Lord Bruce of Donington, on his comment that the report should receive much wider publicity. I should like to think that from today that publicity may be received as the report is positive and thoughtful in its entirety.

Lord Tordoff: My Lords, I hope the noble Lord will forgive me as I hate to interrupt him. I do not think that the publicity that has been given has reached the citizen directly but the noble Lord, Lord Tomlinson, took the trouble of sending a copy of the report to the chairmen of every member of the FTSE 100 index. He received a considerable number of helpful replies from those people. So it has had a quite wide circulation to those 100 people, their economists and staff.

Lord Plumb: My Lords, I thank the noble Lord for that extremely useful intervention. However, the noble Lord, Lord Bruce of Donington, said that the report only reaches those in the City involved in business and not the average person on the street. But it is those people who employ the individuals; we need to get the message to them.
	Many of the individuals we meet on the street or in the workplace believe that joining the euro is a step too far. We hear so often that they believe that the single market--the freedom of movement of people, goods services and capital--is as far as we should go. Yet we see the gap--it has been as much as 25 per cent--between the value of the euro and sterling. That means that we have a totally unequal market. It is a playing field that I can only describe as a slippery slope. It is remarkable that over the past two or three years producers in this country have managed to survive in circumstances where products are pouring into the United Kingdom and we are denied the opportunity to export. In agriculture--the area I know best--in food production, 40,000 left the land during the past year mainly due to the disparity in the market place.
	In his opening remarks, the noble Lord, Lord Tomlinson, said clearly that it is almost impossible to judge the full success of the euro. Yet the evidence received from almost everyone was favourable. He said that it can be judged only by the economic conditions of the European Union as a whole and its relations with the remainder of the world. We are all well aware of the growing influence and impact of the World Trade Organisation. In that sense, we in the European Union have a responsibility to get our act together with regard to the rest of the world in terms of trade.
	My noble friend Lord Renton of Mount Harry said that the euro would be seen differently when in hard currency. I have made that point on many occasions. One can spell that out to the travellers. As the noble Lord, Lord Barnett, said, the benefits of the hard currency will come home to the 8 million travellers when crossing the borders in euro-land.
	That leaves us with the overall situation in the European Union. It is often seen as economically sclerotic and politically bankrupt. We know that that is nonsense. Equally, we should know that our place in the European Union allows us to share in the benefits of the Union, which by any standards is one of the most economically dynamic regions in the world as well as being a bulwark defending democratic values. If the European Union were so awful, why would so many countries be queuing up to join, knocking on the door? It would be a tragedy if the United Kingdom were to turn its back on Europe just as it was on the verge of reuniting the continent of Europe. Shaping events, not reacting to them, is surely the order of the day.
	The EU has a global influence on the economic and political plane. That will be reinforced by the European security and defence policy--and, many would say, by the euro itself. But that does not mean that it creates conflict with the United States. The United States is the closest global partner of the EU and will doubtless remain so under a different regime. For all the headlines, the reality is that the Atlantic relationship is flourishing, particularly in the private sector.
	Any attempt to put a figure on the membership is doomed to failure. Any attempt to look forward over the next few years to determine what the economic climate will be is pure speculation. But most policies in the European Union--environment, trade, co-operation against crime, the drugs trade, the single market and economic and monetary union--have little or nothing to do with the Budget. Trying to quantify those matters makes no more sense than quantifying concepts such as collective defence, the rule of law or parliamentary democracy.
	The assumptions following some public attitudes that we hear far too often are that the European Union is static and that the United Kingdom has no influence in it. Both are wrong. One has only to pick up a newspaper to see that there is a fundamental debate about how the European Union works on top of years of policy change in areas ranging from economic and monetary union to security, and from the fight against crime to economic reform. In many of those areas the United Kingdom has had a profound influence: in police co-operation, economic reform and moving towards a freer trade.
	We need more input not less. I take seriously the comment of the noble Lord, Lord Peston. He said that the European Parliament was pathetic in its reaction to the present proposals. I served for 20 years in the European Parliament. I can only say that when the noble Lord, Lord Tomlinson, and I were there it seemed very different.

Lord Desai: My Lords, my noble friend Lord Barnett said that I should be an exception to every rule. As the last speaker before the noble Lords who will wind up the debate, I am tempted to disagree with everyone but I shall not do so. I note that the Labour Party has a new invitation for the election: that we should vote with our heads and our hearts. On this topic, too often the heart is involved rather than the head.
	I used to be a wild enthusiast for EMU. In 1992 I wanted immediate entry without any convergence criteria. Since then I am a disappointed enthusiast. Since the Edinburgh summit when Mr John Major was Prime Minister, the EU has become arrested in its development. The steady march towards what I had hoped would be a more integrated state has not occurred. There has been no leadership since Jacques Delors gave up presidency of the European Commission. There is no leadership among chief executives, prime ministers or presidents of Europe, as was evident at Nice. That was no way to run any meeting.
	I do not question whether the euro is good or bad, or whether we should go in. I wish to examine the euro critically. Having a single currency without a single state creates problems. Some Euro-sceptics fear that a single currency will lead to a single state. Those who love the EU get defensive about the issue. They do not want to admit that a single currency without a single state will cause severe problems.
	I agree with my noble friend Lord Lea that it is too soon to judge whether the euro has arrived. There has been no major event in the past two years that could be described even as a shock, much less a symmetric or an asymmetric shock. We do not know how the system would cope with an asymmetric shock.
	We have to examine the euro in an instrumental way as a currency. Is it working? As a past member of the committee, I know what an excellent committee it is and how carefully its reports are written. However, there is one major question for the country that the report does not address. I shall confine myself to my disagreements with the report. Praise will only go to the head of the noble Lord, Lord Tomlinson.
	There is a problem of excess volatility. I agree with my noble friend Lord Peston that in a flexible exchange market there is no correct level and there will be volatility. However, I am worried that, although the euro-dollar rate, given in figure 4 on page 39, was more or less between 1 and 1.40 dollars between 1986 and 1999, it has gone below 1 dollar since the establishment of economic and monetary union. It may go up again, but we have to note not just the fluctuation but the fact that the trend of the euro against the dollar is downward. I know that it has turned up slightly in the past three or four weeks, but one must worry when a new currency shows such a steady trend against a leading currency.
	It has been argued that the situation is due not to the euro's weakness, but to the dollar's strength. There has been an interesting change in the relationship between the pound and the dollar and between the pound and the euro. The pound used to move with the dollar, but now it has decoupled and is moving more with the euro. However, it is no good denying that the pound is overvalued against the euro. We have to ask why it is so.
	I have argued previously that there is a fundamental institutional shortcoming in the Maastricht treaty: nobody is in charge of the external value of the euro. Even in a flexible exchange world, somebody has to be responsible for making a statement on whether the currency is too high or too low. In the United States, the Secretary of Treasury is the only person who makes a statement about the dollar. In Europe, everybody has an opinion and expresses it, from the Chancellor of Germany to every other Minister or member of the Commission.
	Those arrangements will not do. That gap in the institutional set-up of the euro must be repaired. Somebody--perhaps ECOFIN--ought to be responsible. Whoever it is, people ought to know who to go to in a moment of crisis for an authoritative statement on whether the euro is high or low. Of course, ECOFIN cannot do anything about the problem because it can give only general orientation to the ECB about the external value of the euro. Some people think either that the external value of the euro does not matter or that devaluations are welcome. Our experience of devaluation has been pretty terrible, so I hope that nobody else starts to rely on it.
	It would be very good if the euro were to settle down at some value--I shall not call it an equilibrium value, but some value, plus or minus 5 per cent--and stay there for at least six months. It has not stayed at any specific value for even three months in the past two years. It has been very successful at achieving price stability, but there was price stability before. There has been no great change on that. Inflation was low in the European Union countries and it has not been appreciably altered by the ECB.
	This is not about whether we like the EU: it is about whether the currency works. That is a non-emotional question. Currencies are instruments. One cannot die for them--or at least I hope not.
	Price stability has certainly not been worsened. I agree again with my noble friend Lord Peston--it is always a surprise when economists agree with each other--that the target has not been set up intelligently. However, the downward trend of the euro is news. We must acknowledge that and not live in a fantasy land where we believe that the euro is on its way up every time it appreciates by 1 cent and that it will soon beat the dollar. We need to forget about the ambition that the euro should be not just a currency, but a revenge against the United States to show how macho we are. The aim of the euro should not be to beat up the dollar. It should aim to be a stable currency against the dollar, at whatever level it chooses. It has failed to do that so far.
	That structural defect in the operation of the euro ought to be addressed at some level, either in ECOFIN or at one of the rather untidy summits at 4 o'clock in the morning on the fifth day after the seventh shirt. That situation must be brought under control and the euro has to show that it can be stable to within plus or minus 5 per cent. I do not ask for parity with the dollar any more. I used to want that, but all my life my dreams have been disappointed and one more will not make any difference. It simply needs to stabilise at some level. There ought to be institutional arrangements in the EU to have a single, authoritative spokesperson for the euro. Once that is done, we can address the question of whether we should join. I am not a Euro-sceptic and never have been, but I do not want to join a disfunctioning currency. We have had a disfunctioning currency for too much of the past 40 years. Now that sterling is functioning properly at last, we cannot join another disfunctioning currency.
	I should like a sixth condition on top of Gordon Brown's existing five: there needs to be some stability between the dollar and the euro at whatever level, plus or minus 5 per cent. The excess volatility and the euro's downward trend ought to be reversed or fought.
	On the other issues, such as accountability, I entirely agree with my noble friend Lord Peston. It is shocking that the democratic deficit in the European Union has been further deepened by the central bank. The sooner the ECB starts to behave like an institution functioning in a proper democratic environment, the better for all of us. It is no good the central bankers hiding behind secret doors. We have to know why they do what they do--or do not do. They are answerable to the citizens of the European Union, because that is where their legitimacy comes from. They cannot be above the law. They have to be subject to the law. If not, when they fail we shall have no recourse to anything.

Lord Marlesford: My Lords, before the noble Lord sits down, perhaps I may ask him a simple question about a matter which I did not understand from his most interesting speech. If exchange rates, among many other things, measure the difference between the functioning and structure of economies, why would he expect there to be stability between the dollar and the euro?

Lord Desai: My Lords, I do not know that a long-term level of equilibrium exists between currencies. I agree with the noble Lord on that point. However, I expect policy to be at least marginally effective in keeping fluctuation between currencies down to a small band. I am not in favour of fixed exchange rates but I believe that, at least in the short to medium term, we should aim to manage currency better. In this case, six months before the euro was launched, no care was taken to stabilise the money flowing into the component currencies. Therefore, the euro started too high. That was the first failure of the ECB and we are still suffering from it.

Lord Newby: My Lords, I join many other noble Lords in congratulating the noble Lord, Lord Tomlinson, and his committee on an extremely valuable report. I agree that it deserves a wider audience than almost certainly it has. I do not know whether, in addition to sending it to the FTSE 100 companies, the noble Lord sent it to the editors of the eurosceptic press. If he did, clearly they have not read it. I also agree with noble Lords who said that the report deserved a better response from the Treasury. Its document was pathetic.
	I am sorry not to see the noble Lord, Lord Pearson of Rannoch, in his place. I had hoped that he might use this debate as an opportunity to explain to the House why he withdrew his Bill this evening at such a disgracefully late hour. Perhaps the noble Lord, Lord Saatchi, can enlighten us. The report will of course make extremely depressing reading for the noble Lord, Lord Pearson, and those who share his views. It demonstrates that the euro is achieving the goals set for it and that it is helping the euro-zone to deliver more growth, more jobs and more stability.
	I want to refer to the robustness of the euro-zone and the "one size fits all" argument. A number of noble Lords said that we have been in a benign period over the past few years. They forgot to mention that we have seen extreme volatility in the oil price, which in previous decades has had a severe effect on domestic economies. No such severe effect has occurred in the euro-zone, where inflation remains low and stably low. The rise in the oil price has also had a somewhat asymmetric effect, not least on Ireland--an economy much discussed this afternoon.
	I want to say two things about Ireland before moving on. First, according to the harmonised index of consumer prices, the latest inflation figure for Ireland has fallen significantly to 4.6 per cent as excise duty rises have fallen out of the index. I believe that it is generally accepted within Ireland that by the end of the year the inflation rate will have fallen to some 3 or 3½ per cent. That is hardly a horror story.
	My second point with regard to Ireland is that one of the other main reasons why we have experienced such a high level of inflation is that the Irish economy has been extremely successful. We heard from my noble friend Lord Hooson about recruitment from Wales. Can any noble Lord say when the Irish economy has been so strong compared to the UK economy that the Irish have recruited large numbers of workers from this country?
	Why is the Irish economy so strong? The answer is principally because, virtually more than any other member of the EU, the Irish have realised the benefits of membership, played by the rules, worked the rules to their advantage and done jolly well out of it. There is a lesson there for the UK. Unfortunately, I fear that many noble Lords who have spoken about Ireland this afternoon have drawn the wrong conclusions.
	Before I return to the effects of EMU on the real economy, I want to refer to the ECB. I had the privilege of being a member of the House of Lords Select Committee on the MPC of the Bank of England. Many of the issues discussed in relation to the ECB are those which we examined in relation to the Bank of England. I agree with the noble Lord, Lord Peston, that the inflation target of a single point in the UK has advantages over a range, as is the case with the ECB. However, the two greater problems which have been identified are transparency and accountability.
	With regard to transparency, I believe that some evolution has occurred. There have been positive developments in the publication of forecasts and, now, the publication of the models which the ECB uses. However, I agree with the noble Lord, Lord Peston, that further movement is needed. I am sorry to disagree with my noble friend Lord Hooson, but I believe that minutes should be published.
	Leaving to one side the question of voting, which may or may not be included in the minutes by choice, at present many people argue that one should be able to identify from minutes of any type how individual governors have voted. However, if the last paragraph showing the voting intentions is removed, I defy anyone to carry out a textual analysis of the minutes of our MPC and to identify who said what. Therefore, I do not believe that to be a creditable argument against greater transparency.
	With regard to voting, I understand why the governors seek the protection of anonymity. However, I am also conscious that the arguments which they use are those which are always used by those in power to justify secrecy. It is possible that at present the publication of voting is a step too far. However, if minutes are published--I do not believe that a compelling argument exists against that--the publication of voting would be the logical next step.
	I believe that there are two ways to improve accountability. The first is to strengthen dialogue with the European Parliament. Although the noble Lord, Lord Peston, said that that dialogue has been pathetic, I believe that my colleague, Chris Huhne, and his colleagues in the European Parliament would argue that over the past two years they have been relatively successful in moving the ECB slowly towards greater transparency. Certainly, they believe that they have not yet finished. However, the Parliament is clearly the logical principal body to which the Bank should be accountable and they should keep on trying.
	The second form of accountability is no less important, if somewhat less formal. It is for the Bank's president, chief economist and other senior staff to explain constantly to a range of audiences what the Bank is doing and why. In his evidence, Mr Issing, the chief economist, said,
	"As a matter of principle, we do not appear before national parliaments".
	He appears to have forgotten that he and Mr Duisenberg appeared before the MPC Select Committee of this House. We found it an extremely valuable meeting. The Bank should not shy away from future meetings with UK parliamentarians or with representatives from other EU legislatures.
	They should also follow the practice of some members of the UK MPC in making considered speeches to financial and business audiences, setting out the Bank's thinking on the developments and the outlook for the European economy and explaining how the Bank seeks to fulfil its remit. I believe that all those issues about the details of how the Bank operates are of secondary importance when put alongside its achievements in successfully managing the introduction of the euro and the euro-zone inflation rate.
	We can also see that considerable success has been achieved if we move away from the inflation performance of the euro-zone and look at the real economy. A number of noble Lords referred to the degree of structural change which has flowed from euro-zone membership. Rightly, the Government have attached great importance to the ability of the euro-zone to introduce greater flexibility into the labour, produce and financial markets. The report sets out changes in labour markets to increase flexibility which have taken place in Spain and the Netherlands, and it refers to the Lisbon commitment to increase flexibility across the euro-zone. Other member states, such as France and Germany, have made less progress. However, to use the words of the German ambassador, they have "made a start".
	The key point is not the absolute pace with which individual countries have begun to move and how far they have moved to date but the fact that they have begun to move and are committed to make further changes. On that point, I agree very much with the noble Lord, Lord Plumb, who talked about the fact that the EU is not a static body and that developments are occurring across a wide range.
	In addition, we must accept that the structural changes which are suggested and implemented are often extremely politically difficult to achieve, whether they be cutting unemployment benefit, reducing non-wage labour costs, introducing fixed-term contracts or reforming pensions--an issue covered by my noble friend Lord Taverne.
	When the UK went down that road in the 1980s and 1990s there was a huge political debate and reform was achieved at some political cost. It is hardly surprising that that is exactly what is currently happening in France and Germany. There is considerable resistance to change--it is difficult to introduce changes. We should now have the wisdom to accept the judgment of many euro-zone members that EMU membership has given the reform process substantial extra impulse.
	If we look elsewhere in the real economy, as the noble Lord, Lord Cobbold, explained, we see that there has been an explosive growth in the volume of euro-dominated corporate bonds which is having a strong positive effect on business investment. There has also been an explosion in cross-border mergers and acquisitions, which is another area in which EMU membership has given a boost to economic activity and which is likely to lead to improved productivity and therefore to sustainable growth. As my noble friend Lord Taverne explained, that has almost unanimous business support.
	With all that going on, I cannot agree with the noble Lord, Lord Desai, who said that there is no movement. There may at times be a lack of the visionary rhetoric that was apparent 20 or 30 years ago but, as the noble Lord, Lord Peston, pointed out, people were talking about EMU in the 1960s. In the more pragmatic 1990s, we actually got round to introducing it.
	For the moment, we in the UK can only watch those developments with no little envy. In 13 weeks we may well find ourselves in a new Parliament with a firm prospect of an early referendum on Britain's EMU membership. As that battle is joined, the report that we are discussing today will be invaluable in setting the scene and in helping to define the battle lines.

Lord Saatchi: My Lords, it is a great pleasure to wind up on behalf of these Benches after such a thought-provoking and timely debate on such an interesting report. Although I enjoyed the debate, if it had been a football match, the score at the moment would be 13-2. However, I shall try to make up for that in extra time.
	I must first praise the noble Lord, Lord Tomlinson--I am sure that my praise will not go to his head--and all of the other distinguished members of the committee, who have, as many noble Lords have said, done an outstanding job in producing the report. As the noble Lord, Lord Bruce of Donington, said, it is truly a formidable report. It has tremendous breadth of research and analysis, and evidence was taken from the key people at the highest level. The report's quality of writing is remarkable--it is a tribute to all of the members of the committee, the Clerk and the specialist advisers. It brings great credit to your Lordships' House. The noble Lord, Lord Hooson, said that such reports are one of the greatest contributions that this House can make to public life. I should go further. As the noble Lord, Lord Desai, said during our consideration of another Select Committee report--I believe it was a report on the Monetary Policy Committee--Select Committee reports of your Lordships' House should be required reading in schools and universities. I totally agree.
	When I got down to reading the report, I was struck by the committee's definition of its basic purpose, which the noble Lord, Lord Tomlinson, repeated today. He said that he was trying to make a contribution to the debate on whether the single currency has so far been, to use the Government's word, successful. As the noble Baroness, Lady Sharp, reminded us, the report's authors conveniently set out in one paragraph--paragraph 28--some of the criteria by which the euro's success or failure can be assessed. Those criteria include: increased rate of growth; greater incentives for fiscal responsibility and structural reforms; increased transparency; enhanced competition; greater liquidity; savings on transaction costs; and higher investment. No one could desire a more worthy wish list.
	The noble Lord, Lord Cobbold, mentioned some other categories that were related to progress in bond and equity markets, and my noble friend Lord Northbrook described the impact that the euro was having in some other countries. I do not propose to analyse any of those criteria today. Other noble Lords have done so better than I can. Those criteria are indeed the stuff of tests and measurements, which can be carried out by what the noble Lord, Lord Barnett, called an objective observer in a laboratory.
	I want to concentrate on just one of the concerns that the Committee considered; namely, that about the future, not the past, which my noble friend Lord Shaw of Northstead said was very important. That concern is aired in paragraph 29 of the report, which is about whether the euro might,
	"increase the pressure for closer political union".
	Five hundred years ago, Dante--I shall quote him only to relieve the noble Lord, Lord Newby, of the stress of hearing me quote Plato--set out the premise on which the euro is based. I shall quote him at some length. In 1459, he wrote:
	"mankind at its best depends upon unity in the wills of its members. The Scythians, for instance, live outside the seventh circle, experience extreme inequalities of day and night and endure an almost intolerably piercing frost; they require a different rule from the Garamantes who live in the equinoctial zone, where the days and nights are of equal duration and where the excessive heat makes it unbearable to wear clothes. But our meaning is that mankind should be directed by a common law issuing from one supreme prince, and applied to those characteristics which are common to all men".
	Today, the public--the noble Lord, Lord Bruce, called them the ordinary people--are being confronted with powerful arguments for the modern version of Dante's vision. The noble Lord, Lord Hooson, and many other noble Lords who have spoken today are deeply affected and attracted by that. We are told that although everyone wants to be in charge of their own fate, nothing is completely sovereign. No man is an island, not even this one.
	We are reminded that with global financial markets, economies are interdependent. We are invited to see the euro as just another symbol of global capitalism; to observe daily mega-mergers and global corporate alliances; to note that jobs move to wherever it suits global corporations to employ people; and to hear employers teaching every day the meaning of e pluribus unum--that unity is strength--and that the strong go forward, that the weak go the wall, that size is everything and that only a few will survive. If nobody can stop the globalisation of companies, can the globalisation of countries be far behind?
	That is what political leaders in euro-land argued to great effect in order to give birth to the euro in the first place. From their perspective, it is only misplaced romanticism that leads Britain to refuse, as my noble friend Lord Renton of Mount Harry put it, to cross the Rubicon.
	Yet, after all of those powerful arguments, the latest opinion poll in our country shows that 71 per cent of our citizens will not vote to join the euro. That is not a success for the euro but it is, I contend, a tribute to the rationality and sophistication of the great British public. I shall try to explain why. Because, in arriving at that judgment, the public have carefully considered two sets of objections to the euro, both of which are well documented in the report. The first set involves economic objections: that it will fail; that it will cost jobs, raise taxes and lower pensions; and that bad things will happen. The public have worked out that that first set of defects--the economic objections--are capable of remedy by delay. In other words, a rational person could say, "I am a cautious man. I think that this may go wrong. Therefore, I will be prudent and wait and see. What's the rush?". In the event that time passed and that man's fears proved to be groundless, a rational man could say, "Fine. Now I am satisfied. Now I go in". That is a completely coherent position, and it is the position that the public have wisely absorbed.
	The public have also considered a second set of objections, which involves our sovereignty, nationhood and traditions and, fundamentally, the accountability of the rulers to the ruled. The noble Lord, Lord Peston, referred to that as accountability to democratic institutions, which, he said, was of the essence. The noble Lord, Lord Desai, made similar remarks. The public have concluded that such constitutional objections are not capable of remedy by delay. There never will be a time when the arguments of sovereignty and accountability can be overcome by observation of economic outcomes or the results of tests, particularly not tests prescribed by the noble Lord, Lord Barnett, as "pretty meaningless".
	No, my Lords. Perhaps it is true that, as the noble Lord, Lord Bruce, said, the £20.30 price of this report was too much for the public and, therefore, the public may not have read it. But they are well aware of its conclusion. In the "And finally" paragraph of the report, it says, starkly:
	"The will to create the euro was political".
	The public know, without reading the report, as Sir Edward George does, that:
	"Monetary union is fundamentally a political rather than an economic issue".
	That is true, and the public know it but, surprisingly--and it may be ironic--they have not responded in the way that the noble Baroness, Lady Sharp, did. On seeing that it was a political project, the noble Baroness said that we should accept it. But on the other hand, the public have taken a different view and that may be because the public know that in politics, as in law, motive is all. It may be that they are asking themselves where the political will, so-called, to drive the political project, so-called, comes from.
	Was the project not driven by envy? Does paragraph 28 of the report not state that the aim was for the euro,
	"to rival the US dollar in world markets".
	Was it not envy of what Americans had that Europeans wanted, envy of American cultural imperialism, which they saw as paving over precious national identities with a homogenised American version of reality? Was it not envy of American economic imperialism in which American companies march on to world domination in the name of globalisation?
	One of the witnesses was the governor of the Bank of France, M Trichet, whom several noble Lords have mentioned today. I do not know whether noble Lords are aware that when M Trichet was asked why it is necessary to have the euro, what is the fundamental reason, his response, which he deploys as a party piece--it is quite effective--is to ask his audience first, "Are you aware, ladies and gentlemen, what is the share of world trade accounted for by America?" The audience is usually baffled and he says, "It is 30 per cent". Then he says to his audience, "And tell me, what is the share of world transactions accounted for by the dollar?" His audience looks blank and he says, "Well, it is 70 per cent". He explains that that is the imbalance, the injustice, which should be corrected by the euro.
	My one regret about this magnificent piece of work is that the Select Committee saw no one witness from the American administration. That would have been fascinating.
	Those issues of sovereignty and accountability will come to the fore when the debate on the euro begins. But as the Select Committee says, the response to the debate on the referendum, when it begins, will depend on the extent to which the public is provided with accurate information.
	At the moment, the Government show no desire for a debate on the euro. One reads every day that the Government's strategy is for no better reason than the polls show that they will lose it. They prefer the sort of language of which Sir Humphrey would approve, as in Dr Itmar Issing's phrase quoted in the report. He said:
	"It remains indispensable for the success of monetary union and the maintenance of price stability that congruent institutional arrangements and appropriate behavioural patterns can now develop".
	I do not think that the Government liked it very much when the president of the Bundesbank translates that into plain English when he says:
	"A single currency does not require a single government but a single government will follow";
	or when the governor of the Bank of France, M Trichet, explains that we must have monetary union because,
	"it is the essential precondition of political union".
	I fear that the Government think it better to follow the strategy of President Johnson in the White House when he was asked by his aides, during a particularly heated period during the Vietnam war, whether he would conduct a public debate on the Vietnam war in America. He thought about it for a few moments and then his famous answer was, "If you have a one-eyed mother-in-law and her one eye is in the middle of her forehead, you do not bring her out of the kitchen". That appears to be the Government's view. They want us to fret alone in the dark with our fears and insecurities in our heads about how we can make it on our own: are we not too small; are we not too weak? Theirs is a basic appeal to fear. But when the referendum comes, I think that they will find that the British public are made of sterner stuff.
	The Select Committee has done a splendid job and, as I said, has shown your Lordships' House at its best.

Lord Barnett: My Lords, the noble Lord has commended to us the view of the 71 per cent of the public who are opposed to joining the euro. Is that the view of the Official Opposition?

Lord Saatchi: My Lords, the Official Opposition's view is always to take an interest in what the public think and what are the public's concerns. Therefore, naturally, we are interested in what they have to say.

Lord McIntosh of Haringey: My Lords, I join with other noble Lords who have congratulated the committee, its chairman, it special advisers and its Clerk on an excellent report. I was particularly grateful--at least for a short time--to my noble friend Lord Tomlinson for his introductory remarks when he said that the committee had ruled out discussion of UK entry and any discussion of the future. I thought to myself, "Well, that cuts out nine-tenths of what I was going to say so I can strike through it". Indeed, I have struck through it.
	But, unfortunately, the debate did not take that line. Most noble Lords who have taken part have been talking about UK entry and the future and it is incumbent on me, to some extent, to follow the debate which has taken place.
	I do not know that I can follow the exquisite speech of the noble Lord, Lord Saatchi. A debate on public opinion addressing the euro is neither covered by the committee; nor is it covered by the rest of the debate. But I enjoyed his speech very much. I shall read what he said with great care and as a past practitioner in survey research I shall be very interested to see how he arrived at the conclusions he has reached.
	I shall go back to the more fundamental issues rather than the issues raised by the report. But in doing so, I should say that I shall save until the end my response to the unfavourable reaction--I put it as neutrally as I can--to the Treasury's response to the committee's report.
	The starting point in the report is the criteria by which the success of the single currency could be measured. That is set out very well by the committee in paragraph 8 on page 7 of the report. It is set out as being the view of witnesses rather than the view of the committee but the committee gives general endorsement to the points made in paragraph 8 and the Government would broadly accept that those are reasonable criteria for judgment.
	The important point about our response to those criteria would be contained in the comments made by the Chancellor to the Treasury Select Committee hearing in another place on 25th July last. He said that the test of the success of the euro is implicit in the five domestic tests we are applying. In other words, he was reminding the committee that we have indeed set out five economic tests and I was almost driven to repeating them in Starred Questions this afternoon. Those are tests that we would apply to a successful euro. Therefore, before we apply those tests it is incumbent upon us to reach a judgment as to whether the euro is successful. That is where the committee's work in relation to this report, the previous report and the forthcoming reports that are promised, is so important and valuable. Even the noble Lord, Lord Desai, who appeared to be searching for areas of disagreement with other noble Lords, would agree that one has to make a judgment about success as implicit in the five domestic tests we are applying.
	A number of noble Lords have said that those tests are meaningless. My noble friend Lord Bruce of Donington said something of that nature; and my noble friend, Lord Barnett, believed that no judgment could be clear and unequivocal, a view with which I sympathise. However, if a test is meaningful and it is not met we would fall into the trap of making the old mistakes. We would mistake exchange rate stability for more general economic stability which would leave the way open for the stop-go economic policies and stop-go economic results that were a feature of much of the past 20 years.
	I do not believe that the tests are meaningless; they are challenging. Therefore, I believe that making a decision during this Parliament is not realistic. A period of stability and settled convergence is needed before membership can be considered seriously. I know I am not saying anything new and I do not intend to, but we have said that we shall make an assessment of the five tests early in the next Parliament.
	Having said that, my noble friend Lord Bruce challenged me to say whether the Government were neutral on such issues. No, the Government are not neutral. The Government want the euro to succeed for the benefit of Europe and for the benefit of the United Kingdom. The issue of UK entry is, and in our view always has been, dependent on UK economic interests.
	On the success of the euro in European terms, which is the thrust of the report, we accept that some of the tests are still to come, as the noble Lord, Lord Shaw of Northstead, and the noble Baroness, Lady Sharp, said. That is true. The noble Lord, Lord Shaw, thinks that we are too early and my noble friend Lord Peston thinks that we are too late. Nevertheless, it is true that we have not been through what one may describe as a full economic cycle. What is wrong with starting at the right time? It must be remembered that at the beginning there were fears of serious economic shocks from crises in East Asia that threatened to spread around the world. Those shocks have been well-absorbed and well-resisted by euro-zone.
	That is important not just for Europe, but also for us, because Europe is fundamental to our economy. We have about 3 million jobs that are directly affected by our economic ties with Europe. Over 50 per cent of our total trade is with the European Union; nearly 50 per cent is with the 12 countries in the euro-zone; and the European Union is our largest trade and investment partner. That is why in October 1997 the Chancellor said, as I have quoted so many times:
	"The potential benefits for Britain of a successful single currency are obvious: in terms of trade, transparency of costs and currency stability".
	By helping to sustain a zone of economic stability across Europe, a successful single currency should reduce the harmful effects of volatility on investment, employment and ultimately economic prosperity. That view has been reflected by nearly all speakers. The noble Lord, Lord Saatchi said that the score was 13 to 2 and with him it became 13 to 3. I ask myself why the Euro-sceptics fled away from this debate. Was it because the raw material with which they were supplied by the committee did not in any sense support their arguments?
	It is also important to recognise the truth of what is said in paragraph 17 of the report, in contrast to the general level of comment in the UK press. It speaks of the advantage to the economies of European countries of the low euro in its opening months. The noble Lord, Lord Taverne, rightly said that the European business world disagrees with that and the noble Lord, Lord Cobbold, made a valuable point about the growth of the euro bond market and how that shows the approval of the European business community.
	On economic development, much has happened in the two months since the report was published. There have been a number of developments in the global economy. There has been a sharp slowdown in the United States and in emerging Asia; some renewed weakness in Japan; a cut of 100 basis points in the US Federal Reserve interest rates; and the prediction by Alan Greenspan of growth "close to zero" this quarter as the momentum of weak consumer spending is exacerbated by falling consumer and business confidence.
	The Commission's spring 2000 forecasts projected that GDP was likely to show relatively robust growth rates. The most up to date forecasts available from the Consensus survey in January 2001 showed slightly reduced, but not dramatically reduced, projected growth rates. As the noble Lord, Lord Cobbold, said, the euro has had a significant impact on producing a capital market to rival that of the United States.
	The supplementary memorandum to the committee produced by the Treasury after its witnesses had given oral evidence cited the European Central Bank's analysis of January 2000. It said that there had already been consolidation in the financial services industry; it pointed out the increase in the numbers of firms listed in equity markets and in the growth companies. The evidence is that the euro is having profound effects on European financial markets with pervasive consequences not only on their functioning, but also on their contribution to the overall efficiency of the economic system.
	In looking at those economic trends it is important to look behind them at the issue of economic reform; in other words, the benefits can be realised only if monetary union is underpinned by markets that work well. We need to make more progress, to build on the foundations of the single market and to improve the functioning of our product, labour and capital markets. That is made easier by the transparency of the single market for all the reasons that I have already given.
	A number of your Lordships spoke about Ireland. I tend to agree with the noble Lord, Lord Newby, that that is hardly a horror story. My noble friend Lord Tomlinson described Ireland as a special case. I believe it is generally accepted that Ireland's share of the euro-zone economy is such that it could be treated as de minimis. The noble Lord, Lord Renton of Mount Harry, made that point. Despite the fears of the noble Lord, Lord Northbrook, we have to accept that the stability and growth pact is not breached in any way by Ireland. That has been accepted.
	If ECOFIN at its next meeting considers the stability and convergence programmes, including Ireland, the United Kingdom will not be backward in arguing for robust and accurate assessments of every member state's stability or convergence programme. That is because we believe that the process of multilateral surveillance within Europe involving peer review is rigorous. It seems to me extreme to argue that Ireland has in any way disproved the success of the euro.

Lord Shaw of Northstead: I thank the Minister for giving way. According to the reference from Brussels, Pedro Solbes claims that Brussels has the authority, under Article 99, to enforce economic policy co-ordination among member states to protect the common interest. Do the Government of the United Kingdom take that view?

Lord McIntosh of Haringey: My Lords, if we consider the powers that ECOFIN could express at its meeting next week, it is most likely that it will express only an opinion, which would not be binding. The next step would be a recommendation, which would have to be considered by the European Commission. The power to take over the economic policy of a member state is a very long way away, and nothing that I have said in support of multilateral surveillance and peer review implies that we would support it.
	I should like briefly to refer to the European Central Bank, about which there has been a great convergence of view among witnesses who gave evidence to the committee and Members today. It is important that the European Central Bank should be as open and transparent as possible, because that is the way in which it will gain the trust of the European public and of financial markets. That is a key feature of the United Kingdom Government's current monetary policy framework. I agree with the noble Lord, Lord Peston, about that matter, not because I presume to criticise the European Central Bank but because I agree with his praise for the Monetary Policy Committee.
	To some extent, matters have improved since the publication of the report. The ECB has for the first time published its staff macroeconomic projections, which were included in a short memorandum to the committee, received by members either on Friday or this morning. Those figures, with the projected HICP inflation in the range of 1.8 to 2.8 per cent and real GDP of 2.6 to 3.6 per cent in 2001 contribute very considerably to our understanding of European economic conditions.
	I am not sure that I can agree with the noble Lord, Lord Peston, about accountability to democratic institutions. I certainly cannot agree with those who suggest that because there is a European Central Bank, there also has to be a European central government. I contest the view that further economic union of the kind achieved by the euro inexorably leads to a single political government. That is not the view of the government of any member state. In those circumstances, accountability to the democratic institutions comprising the euro-zone is rather a long way from the accountability of the Monetary Policy Committee to the Government of this country.
	In conclusion, I refer to the Treasury's response to the House of Lords committee. It was suggested that the Treasury still nurses a grudge about the rejection by this House of Lloyd George's people's budget of 1909. Although I still bear a grudge about the rejection of the 1909 people's budget, I do not believe that that view is very widespread in the Treasury. The point that I want to make is, "Never mind the width, feel the quality". It is not just a matter of whether the final response is two pages long. One has to consider together the very substantial written memorandum that the Treasury produced before giving oral evidence, the oral evidence that was given to the committee on 11th July and the requests for three further notes, producing an additional supplementary memorandum at the end. Although the noble Lord, Lord Tomlinson, accuses us of answering none of the conclusions, if we take the Treasury's contribution as a whole to this debate it becomes much clearer that our response has been entirely proportionate.
	I do not want to be critical of the conclusions of the Select Committee. However, perhaps I may read a few parts of the press release that was issued when the report was published in December:
	"So far, we have examined what is happening in those countries which have joined the euro already, flagging up both the successes and the problems which they have encountered. With the evidence we have received, we are publishing a wealth of features and figures, from which readers can draw their own conclusions...and it is almost impossible to disentangle the effects of the single currency from the other forces at work...All the euro-zone governments from whom we received the evidence assured us that the euro had been successful for them...We recognise that there are also dangers...As for the fall in the value of the euro, so far it has actually benefited the economies of euro-zone countries, but if it continues it could damage the credibility of the euro as a currency".
	Those are admirable sentiments. However, I am not sure that your Lordships would have expected the Treasury to comment at that level of generality. If we take the--

Lord Tomlinson: My Lords, I thank my noble friend for giving way. Nobody asked the Treasury to comment on a press release. The press release is inevitably at a certain level of generality. Will my noble friend now say why the Treasury did not see fit to answer the report, which was of much greater substance. We thought that the standard of literacy and understanding in Her Majesty's Treasury would exceed that to which the report had to be reduced in order to communicate it to the media.

Lord McIntosh of Haringey: My Lords, I considered taking paragraphs 1 to 19 of the report and seeking conclusions at a lower level of generality. I accept my noble friend's criticism that a press release is at a higher level of generality. I considered that point. I also considered whether it would be appropriate for me to read out sections of the conclusions of the committee's report, and to ask the question--no more than that--whether it would have been appropriate for us to give detailed responses, which could have been anticipated, to points that are fairly and generously put in the committee's report, but which, because of the restrictions that the committee placed on itself, are inevitably still of a level of generality, such that in our view no useful purpose would have been achieved by adding to the very substantial contribution that the Treasury made to this report as the work proceeded.

Lord Tordoff: My Lords, I am grateful to the noble Lord for giving way. As chairman of the Select Committee, I am quite upset by this response. It is said that the Treasury welcomes the opportunity to respond to the main conclusions. It is not said whether it feels that it is a good, well thought out report. Therefore, except in so far as it relates to paragraph 3, it is not a response. It is the duty of government departments to respond, in a given period and in some depth, to Select Committee reports.
	I accept that the Minister and the Treasury might not want to go into too much detail on these issues, but the Select Committee has every right to expect a considered response. During the six years I have had the job, this is the first time that we have not had a proper response from a government department.

Lord McIntosh of Haringey: My Lords, I take most seriously what the noble Lord, Lord Tordoff, says. I do not want to open up a division between the Treasury and this House and I apologise if I have been in any way dismissive in my comments. I take that back; that was not my intention.
	However, I take the view that it would have been almost patronising to put into a Treasury response the phrase, "Yes, this is a well written report"; the kind of response the noble Lord, Lord Tordoff, suggested would be appropriate. We take the committees of this House more seriously than that. If one takes the whole contribution of the Treasury to the process of the report and adds to that the short note which appears at the end, it will be found that the Treasury has behaved responsibly in every respect.
	I am sure that Treasury Ministers will want to consider the views exchanged in the past few minutes and will want to respond to the chairman of the European Union Committee, sending a copy of the response to the chairman of Sub-Committee A, dealing with the issues that were raised.
	I have brought this upon myself because at the end of the debate I raised a note which caused controversy. This has not been a controversial report or debate. The work of the committee was welcomed by all noble Lords who have taken part and the Treasury agrees with it. We join those who congratulated the committee on its work.

Lord Tomlinson: My Lords, I thank noble Lords for participating in this interesting debate. I welcome their views and in particular the wide appreciation of the report. I especially welcome the specific points of dissent from the report. We shall all reflect on those issues. I welcome the large number of noble Lords from all parts of the House who appear to be impatient for United Kingdom membership of the single currency. However, I again point out that my welcome is personal, as United Kingdom membership is outside the scope of our report. I confirm the score counted by the noble Lord, Lord Saatchi, as 13 to three. That reflects a wide range of interests in all parts of the House.
	There was a great deal to welcome in the debate and I want to address my noble friend Lord McIntosh perhaps more gently than I did in my somewhat abrasive previous intervention. A new standard has been set in basing a report to a Select Committee on what was said by the Treasury in evidence in written submission. We want to know what it thought of our deliberations after we had reflected on its evidence, not all of which was necessarily fully accepted.
	I address my noble friend Lord McIntosh in the spirit in which he responded to the debate. He said that the Government would accept that the points listed at paragraph 8 are reasonable criteria for success. My noble friend could say that in the debate, but the committee would have been assisted if the Treasury could have said that in its response. If the Government believe it, they should say it.
	My right honourable friend the Prime Minister on his visit to Warsaw spoke about the need for better connection between the people of Europe. In the spirit of compromise finally expressed by my noble friend Lord McIntosh, I suggest that we should at first be a little less ambitious and begin that process by connecting the views of our Treasury to our Parliament. I commend the Motion to the House.

On Question, Motion agreed to.

Fishing: EUC Report

The Earl of Selborne: rose to move, That this House takes note of the report of the European Union Committee, Unsustainable Fishing: What is to be done with the Common Fisheries Policy? (3rd Report, HL Paper 12).

The Earl of Selborne: My Lords, the common fisheries policy is a 20-year programme which will end in 2002. The Commission is required to review the workings of the policy, which has been in place for 18 years, and fundamental consideration must be given to what, if anything, will take its place from December 2002.
	There is widespread agreement that, like fisheries throughout the world, those in European waters have not been successfully managed. It is a common problem that many of the global fisheries are either fully exploited or over-exploited. We see daily evidence of the fact that, however hard we have striven during the past 18 years to put together a common fisheries policy, we have not succeeded. The current regulation is an amalgamation of four different strands which were put together during the mid-term review in 1992.
	Later this year we shall see the publication of a Green Paper by the Commission which will explore what should be expected of the common fisheries policy. That document will be extremely important and we timed our report in order to make an input into the paper. I am grateful to the business managers of the House for enabling us to debate the report so soon after publication. I accept that the Government have not yet been able fully to respond. We did not expect that and are not asking for it. We wanted only to have an opportunity to make a contribution in good time and we welcome this debate before the publication of the Green Paper.
	I begin by expressing heartfelt thanks to our Clerk, Mr Tom Radice, and our two specialist advisers, Professor John Shepherd and Professor John Pope, who took us through the issues with great care. We have produced a report which I hope Members of your Lordships' House believe is clear, relatively concise as Select Committee reports go and does not pull any punches.
	We are also grateful to all those who gave evidence, in particular Mr Elliot Morley, the Minister for Fisheries, and his officials in MAFF who briefed us before we began the report. That alerted us to some of the concerns which we later expressed. We also benefited from evidence from the Director-General of Fisheries at the European Commission, Mr Steffen Smidt. On behalf of the committee, I thank them and all the witnesses who helped us with our inquiry.
	I return to the four strands of the common fisheries policy. It must be remembered that the policy which began 18 years ago was something of a ragbag. The fact that the policy was brought together in the mid-term review does not disguise the fact that it remains unbalanced. The four strands were the structural policy, bringing socio-economic aid; the market policy, helping to promote the sale of European fish; the external policy, dealing with our relations with third countries; and the conservation and management policy, about which, together with other issues, we are greatly concerned.
	At the time of the interim review in 1992 this House had an opportunity to debate a report by the Select Committee whose sub-committee I had the privilege to chair. It is helpful to note that there is continuity in this matter, in that the noble Lord, Lord Moran, who is to speak in this debate was also a member of the sub-committee. As I reread the report of 1992, which went into greater detail about all aspects of the common fisheries policies, it was depressing to reflect that its conclusions were little different from the report which we debate today. We made a conscious decision that on this occasion we would not produce a heavy volume but try to concentrate on the essential issues, in the hope that that would concentrate the minds of the readers and those who took note of our report.
	Therefore, the report that we debate today is slimmer but comes to the same conclusions: that the common fisheries policy has not worked in almost all aspects that it set out to achieve 18 years ago. The scale of failure in terms of conservation and management is such that it is in danger of bringing into disrepute not only fisheries management but all other aspects of EU affairs which seek to apply the concept of sustainable development. After all, fisheries is the one sector which must take into account what we mean by "sustainable development" and "ecological approach". The very fact that emergency action has had to be taken to try to take pressure off cod and hake stocks in the North Sea demonstrates just how unsuccessful have been the measures after 18 years.
	Quotas have been drastically cut in the past two years. Mr Elliot Morley has had a terribly hard row to hoe in enforcing what has certainly been necessary. That is also a reflection on the failure adequately to grapple with issues which go back to the early years of the common fisheries policy. We now have a situation in which there is widespread recognition within the fishing industry that the present scale of the sector is unsustainable; in other words, too much capacity seeks to exploit diminishing stocks. Equally, there is wide concern about the environmental impacts of the fishing industry and the lack of ability to put in place environmental auditing of aspects of the common fisheries policy.
	There is further concern about the impact of the European Union's policy on third countries' fisheries. Very often we have tried to alleviate our own problems by imposing things on others in ways which have caused serious problems for those third countries. All the witnesses we saw, whether it be the Minister, the Director-General, representatives of the fishing industry, environmental interests or those involved in research, accepted with varying degrees of force that there was a need for a fundamental reshaping of the common fisheries policy.
	I should perhaps ask rhetorically whether the common fisheries policy really matters. Clearly, it matters for reasons that I list. First, it is the livelihood of those in Europe who try to derive a living from the fishing industry. Frankly, those communities have been let down by the failure of policy. Secondly, there has been a demonstration of the European Union's lack of ability to implement sustainable development and concern for the environment, which again brings into doubt its ability to manage a much wider range of policies. There is also criticism from our neighbours Norway, Iceland, Greenland and Canada, all of whom have an interest in ensuring that we get our fisheries act together, instead of seeing their own efforts thwarted in part at least by our inability to act as they would hope. There is a failure to order our affairs so that we act when decisive, fast action is needed. Iceland and Greenland, which admittedly have fewer problems, have demonstrated that ability in running fisheries, but Europe has never been able to act in that way. That is why we must record that the failure has long-term implications that go way beyond the fishing industry.
	I move on to one or two more positive aspects. In paragraph 22 we state that since the interim review we have seen the phasing out of tuna drift nets and the introduction of the precautionary principle in fish stock management. A much greater consensus has been built up between the scientists and industry in determining stock levels, albeit everyone now accepts that, sadly, the dire forecasts of the scientists have proved accurate. There is also a much greater inclination on the part of member states, not least the Commission, to accept shared responsibility in managing fisheries. As a concept the sub-committee warmly welcomes zonal management which means that in future responsibility for administering the policies is shared between those who are involved at the sharp end. One of the disastrous aspects on which we reported in 1992 was how little communication and agreement there appeared to be between the different links of the fishing industry.
	Having pointed out one or two matters which have perhaps improved, the basic problem is over-capacity: too many vessels with too great a capacity try to exploit declining stocks. It is astonishing that, in spite of the existence of a financial instrument for fisheries guidance to try to match capacity with effort, it has been so organised that, if anything, multi-annual guidance programmes have increased rather than deceased capacity. That takes some believing. True, the number of vessels has declined, but as new technology comes along and the common fisheries policy in its wisdom gives grants for modernisation of the fleet, which means increased capacity, so all we have achieved over the years is more modern fleets and capacities which have not greatly changed. The Director-General himself agreed that fundamentally the multi-annual guidance programme had not achieved what it had set out to achieve.
	There has been a failure to achieve uniform enforcement. I do not fall into the trap of blaming one country after another. Nevertheless, if one does not have standard enforcement between member states clearly there is a problem of credibility. Many member states believe that they enforce respectfully when others do not and that is their justification for disobeying the regime. There is also a failure to protect juvenile stocks, which is becoming ever more chronic, and, above all, a failure to integrate the structural policies with common fisheries policy proposals for management and conservation.
	Having listed that catalogue of disasters, perhaps I should repeat once more that, although European Union fisheries are just about as bad as they come, other countries have had problems that are almost as great. We know about the need to close a large proportion of the Canadian fisheries off Newfoundland and the US fisheries off the Georgia banks. However, when rethinking the common fisheries policy in the EU there is now an overriding need for clear long-term strategies. There must be political will that we have failed to galvanise in the past. Inevitably, as far as concerns the United Kingdom the responsibility for negotiating in the Council of Ministers is left to a Minister at the MAFF. There was a time when the Minister of Agriculture himself attended such meetings relatively regularly. Fisheries have become more and more marginalised and it is now relatively rare that the Minister of Agriculture himself attends the critical meeting of the Council of Ministers in December.
	I wish to place on record my great admiration for the way in which Mr Elliot Morley has handled the negotiations. I said earlier that he had had difficult decisions to make. He is well aware that his inherited problems arise from a failure to take action in earlier years. But we now need to enlist the help not only of the MAFF but of all the other departments that are involved in and responsible for putting in place a common fisheries policy and the funding of it. In relation to the United Kingdom, the DETR, the DTI, the devolved administrations, and, above all, the Treasury must be brought into the discussions and accept ownership of the problem.
	We set out an overriding objective in paragraph 83. I am delighted that the noble Baroness, Lady Miller, is to speak in the debate because in the committee--although we all have Cabinet responsibility for the report--it was she who urged us to put in place this overriding objective. I willingly agreed with her. The objective in paragraph 83 states:
	"To ensure that the exploitation of marine resources takes account not only of ecological processes but also social and economic consequences".
	Every future measure taken in the common fisheries policy should be tested against that kind of objective. One would not pay people to modernise their fleet if that was a clear objective; and zonal or regional management would be put in place much quicker because only those involved at sea know precisely how to manage one fishery as opposed to another. If ever there was a case for not having blanket proposals over European waters, this is it.
	In paragraph 85 we list seven other objectives. Time does not allow me to go into each of those. But I would draw attention to the socio-economic elements. I hope that others, when speaking in greater detail, will be able to deal with some of those. The socio-economic elements are our key concern. If it is recognised that we need to reduce capacity and balance stocks, it must be recognised that the full impact is ultimately carried by the fishing community. One cannot address one's responsibilities to the fishing community in the half-hearted way that has happened in the past. There was a policy called PESCA which has come to an end. That did not rigorously address the need to find alternative employment, facilities and support for these communities. The issue needs a complete rethink.
	However much long-term strategy is put in place, inevitably we shall have a problem which can only be addressed by complementary measures such as effort control. That means limiting days at sea or quotas.
	In paragraph 99 we say that we would like to see a long-term licensing system put in place. That equates making a living out of catches with the interest of conservation. At the moment, it would be unrealistic to start charging for licences.
	A few witnesses argued for returning fisheries to member states. Having listed my criticisms of the European Union, one might wonder why anyone would want to suggest that there should be another go at that. Fish have no respect for exclusive economic zones. One must have collaboration. We collaborated with Norway. We should collaborate more with Iceland and Greenland. This is a case for collaboration within Europe.
	We are failing the fishing industry. We are failing in our responsibilities to future generations. I am talking of sustainable development and the environment. We are failing third countries. I have not had time to deal with that matter. The Green Paper must demonstrate a fundamentally changed attitude. There must be a response to the Green Paper from the Council of Ministers and others which is much more far-sighted than anything which has emanated from their deliberations before. Once the Green Paper is published, I am certain that the committee will wish to return to the subject. We are determined to make sure that we do not get the inadequate response we were given in 1992. I beg to move.
	Moved, That this House takes note of the report of the European Union Committee, Unsustainable Fishing: What is to be done with the Common Fisheries Policy? (3rd Report, HL Paper 12).--(The Earl of Selborne.)

Lord Hughes of Woodside: My Lords, I am never sure of the protocol of the House, having been a Member for a very short time. I welcome the noble Baroness, Lady Miller of Chilthorne Domer, to the debate. She has had a very difficult time over the past few weeks. I am sure that she understands how we all feel.
	I commend the report for its content and approach to the issue. The report begins with five trenchant comments on and severe criticisms of the common fisheries policy. As the noble Earl, Lord Selborne, said, the CFP failed totally in its sustainability objectives. Warnings about the difficulties facing fishing have been ignored because of a lack of political will. That is partly true. I shall return to that matter later. I am not sure that "lack of political will" is the right way to describe it. No one would disagree that the fishing industry must be helped to address the changing circumstances. Fishing communities deserve attention from senior politicians. In some senses, the senior, and perhaps junior, politicians have paid too much attention to the siren cries of, especially from the catching side of the industry, "There are plenty of fish in the sea"; "The scientists are wrong"; and "Allow us to manage the matter and it will work out all right". Whether that is not enough attention to detail or too much of it and not enough standing back and looking at the whole picture is perhaps a matter for debate. Everyone agrees that a comprehensive approach is needed.
	The difficulty is in arriving at an agreed set of solutions. The common fisheries policy has few, if any, friends at all. But, equally, there are few solutions, in totality, which will meet with unqualified approval.
	When discussing the common fisheries policy and what might take its place, I am reminded of the story of the village idiot who was asked by a passing motorist for directions. He scratched his head and said: "Well, I would not start off here". Many people feel that about the common fisheries policy. Yet the truth is that we have to start off with the common fisheries policy. It is all we have. In broad terms, for the foreseeable future, it is all we are likely to have.
	There are those with the view that the only way to deal with the matter is to have national control of fishing; to abandon the common fisheries policy. I see a couple of heads in front of me nodding in agreement. I suspect that, although I do not have eyes in the back of my head, there are a couple of heads nodding behind me. I do not mean to be sarcastic, but a dislike of the common fisheries policy and the European Union not only crosses the Floor of this House but extends to every quarter of the House. There is nothing new in that.
	There are three strands to the common fisheries policy: the catching side, which some people regard as the most important because it is a primary element of the industry; the processors and the retailers together, certainly the processors; and there are the consumers. The consumers are the most important part of the chain. But they all depend on one fact--there has to be enough fish in the sea to be caught in the first place. That remains the starting point.
	The catching side of the industry, which I have known for many years, in my experience--I come from fishing stock on both my father's and mother's side--does not like regulation. It does not like controls. It does not and never will want controls. It will never be happy with regulation. But I am happy to see that fishermen are coming to terms with the fact that more control is essential for the stocks and the industry to have a future.
	The Select Committee identified the cause of a great many of the difficulties as the member states having not enough of a political role. There is some truth in that. I spent 27 years as a Member of Parliament in the other place listening to the strident voices of the fishing industry saying, "The real problem is that you will not let us control our own affairs. The real problem is that the scientists have got it wrong. You do all these fancy calculations but we can tell you that there are plenty of good-sized fish in the sea". They denied the evidence in front of their own eyes. I remember going to a small fishing port in the north east of Scotland where boxes of whiting had just been landed. They were passed as being the right size to be sold. I said, "You must have grabbed hold of every one of these whiting--grabbed the head with one hand, the tail in the other and stretched as far as you could to make them long enough to pass the minimum size". They were fairly puny things.
	The same is true of the cod stocks. As a boy, I remember cod being landed not by deep-sea vessels but by in-shore vessels, which were as long as I am tall. They may not have had quite my girth but they were certainly as long as that. Now, when you see a cod, you are lucky if it is a large size. That has been happening year after year. No one has grasped the nettle that the fishing effort has to be controlled. I do not know how you can have a sustainable fisheries policy that does not control the total allowable catch--the amount of fish taken out of the sea--and control to some extent how it is shared out. No one will give up relative stability. No one will give up "their share".
	I ask noble Lords to consider what would happen to any fisheries Minister who went to the European Union to demand that the total allowable catch be reduced beyond what the scientists had said. He would be hung, drawn and quartered. He would be pilloried everywhere. That might represent a lack of political will in facing up to that kind of pressure. I am not sure whether that is what the Select Committee means. If it does mean that, it does not spell it out clearly enough for me.
	No one doubts that the industry should adjust. I do not like the word "rationalisation". It is a euphemism for cutting down the number of vessels and jobs. We talk about rationalisation and restructuring when we mean that we have to cut the effort. I accept that perhaps too much money was spent on refurbishing vessels. I ask noble Lords to cast back their minds 10 years or so when it was being argued that we were sending fishermen to sea in dangerously old ships, that we were putting lives at risk by making them go to sea in dreadful old tubs and that they had to have modernisation for the safety of the fleet. We should not ignore that point. Unfortunately, in any consideration of the common fisheries policy, there are issues to be weighed on each side of the argument. We cannot take a view that we should not have modernised the fleet. The fleet had to be modernised. At the end of the day, perhaps the only way forward is a licensing system.
	Figures are constantly being bandied about. We need to know what the Government's thinking is in the immediate as well as in the long-term future. The figure of £75 million to restructure the fleet was given by the Scottish Fishermen's Federation in its evidence to the committee. That figure has now become £100 million. I honestly do not know where that £100 million comes from. I do not know what it means. I suspect that no one will know what it means until there is further discussion with the industry. However, if we are to have a real reduction in catching effort, it will not be done painlessly and overnight. We have to accept that. Fishermen do not like being told that they cannot go out to sea, but that has to be part of the solution. Slowly but surely, they are beginning to come forward and accept that. We are seeing restructuring taking place on land as well as sea. Several quite large processing companies in the north east of Scotland have gone to the wall in recent times. Many jobs have disappeared and more are likely to go.
	There are only two ways in which the industry can come down to the size that is sustainable--given the amount of fish in the sea. One is through government support. I am certainly attracted to the idea of having not just a decommissioning scheme but also making sure that money goes into helping communities to adjust to the change in jobs. That can happen either in a regulated and planned way or through bankruptcy and a war of attrition. To some extent, that is what has been happening up to now.
	I do not know how this package of help will be put together. Support for the industry depends on structural funds coming from Europe. My understanding is that we can get structural funds from Europe only if our MAGP for reducing the size of the fleet is on target. When I last looked at the figures, we were quite short on that. So where will the money come from? How will it be handled? It is all very well speaking about zonal management--certainly zonal management has a part to play--but the central funds are distributed at the moment partly by the Ministry of Agriculture, Fisheries and Food and partly by the Scottish Parliament. I am not sure what role the Welsh Assembly and the Northern Ireland Assembly play in this area. I hope that we shall achieve a uniform UK-wide package. We cannot allow ourselves to be bullied, browbeaten or seduced by one part of the country saying, "The Scots are getting more than the English" or "The English are getting more than the Scots". We have to have a uniform package in order to achieve unity in the industry. Achieving unity in the industry for the future will be extremely difficult because the different parts are historically at odds.
	I am pleased that the committee has drawn the attention of the House to the problems of fishing in third world, especially African, countries. They do not have the capacity to patrol and conserve their own stocks. Perhaps I may give an example. A few years ago--it was certainly after Namibia became independent--I saw video evidence of Spanish vessels, which had no historical right to fish off Namibia, painting out their names and numbers, coming into Namibian waters, fishing until they were fully loaded, going out, then painting their names and numbers back on and going off to Spain. I hope that I shall not fall into the trap of saying, "It is all Johnny Foreigner's fault". It just so happens that the vessels were Spanish, and we have enough trouble with the Spanish in their own waters without them being anywhere else. But we have to understand that we have a part to play in what happens in fishing throughout the world. We need to be forward thinking. I am glad that the committee is indeed forward thinking.
	The committee has produced an extremely valuable report. As it says at the start, it is one of a long list of reports over the past decade, most of which have been, if not totally ignored, almost totally ignored. One hopes that the Government will give take more action and accept more ofthe recommendations of this report than has been the case in the past.

Baroness Miller of Chilthorne Domer: My Lords, before I address the topic of the debate, I should like to express my profound appreciation to noble Lords on all sides of the House and indeed members of staff of the House for the deep support and sympathy they have given me over the past few weeks. It has certainly enabled me to be here today.
	I am pleased to be able to take part in the debate. The chairman has correctly highlighted the issue of the report which I should like to address. I refer to the balance between the environmental and socio-economic aspects of fishing. In paragraphs 86, 87 and 88 of the report, the committee highlighted certain recommendations on the protection of the marine environment. It stated:
	"There must be a much more effective liaison between DG Fisheries and DG Environment. The whole ecosystem of the ocean is greatly affected by fisheries activities".
	The committee went on to highlight that the common fisheries policy is lagging very far behind the common agricultural policy in even recognising that environmental considerations have to be a fundamental part of any activity.
	It took agriculture a long time to realise that it was making a terrible impact on the ecosystem and to understand how that then impacted on the attitude of consumers to food and its production. With the common fisheries policy we are still at the beginning of such a process. In paragraph 88 the committee highlights the fact that the fisheries sector still seems to be lagging behind most others.
	When I read the government responses to the committee's report, I was struck by the fact that the Government's priorities pleasingly include,
	"an economically and environmentally sustainable industry".
	However, their second point states only that there should be,
	"greater integration of environmental considerations into policy making".
	I should like to ask the Minister whether, on reflection, she feels that that statement is strong enough. I believe that the lessons we have learnt from the common agricultural policy demonstrate that we should pursue total integration of environmental considerations into policy making. I hope that, when the Government take their reply to the Commission, they might ask for total integration rather than simply "greater" integration, because the starting point is already so low that it would be hard for it not to be greater than is the case at present.
	One of the difficulties that we must face is that, institutionally and structurally, both the Commission and the UK have failed to integrate in any way their fisheries and environmental policies. Evidence we heard included several powerful examples of where significant improvements could be made. Perhaps I may begin with an example from English Nature, which when commenting on the national position states that:
	"We have given advice to the Ministry of Agriculture in the UK; we have asked to be on the Fisheries Conservation group of the Ministry and have been told that the time is not right for that".
	That is a little depressing, given that English Nature is one of the Government's advisers on matters of conservation. If it feels that it has a contribution to make to the fisheries conservation group, I should have thought that the Government would be pleased to welcome its representation.
	English Nature goes on to say that,
	"an EU Biodiversity Strategy for Fisheries and an EU Fisheries Integration strategy is being developed",
	and that those dialogues need to be brought together. The committee heard a great deal of evidence concerning how little such dialogues are being brought together. That should start with policy making and then feed through to what the World Wildlife Fund pointed out; namely, that,
	"environmental conditions should be attached to the existing structural policies".
	It goes on to say that environmental conditions should be attached to the funding streams which will then result. To that end, the Royal Society for the Protection for Birds highlighted the fact that,
	"structural funds should shift away from capital investment towards promoting environmentally-friendly fisheries".
	The society continued by developing a theme which ran through our entire inquiry; namely, that environmental and socio-economic advantages can be delivered effectively, in particular for inshore fisheries, on a regional level. The government response does not specify whether they are pressing for a redefinition of Europe's inshore fisheries and how best such fisheries might manage themselves. A number of examples were cited to the committee which demonstrated that their managers understand the importance of biodiversity and they want to be able to exercise the degree of management which would enable them to achieve the desired environmental advantages.
	In our discussions, the Minister, Mr Elliot Morley, said that,
	"In institutional terms I think environmental issues are being taken into account".
	Later he pointed out:
	"So you are beginning to see environmental considerations actually being applied to fisheries management".
	The noble Lord, Lord Judd, pressed the Minister further on that point by saying:
	"Do you feel that is going to happen or is it still a bit laid back?"
	The Minister replied by saying,
	"No. I think it is going to happen but there are still issues of conflict".
	I believe that all members of the committee would agree with me when I say that I do not feel that that was a sufficiently strong response.
	Perhaps I may turn for a moment to regional or zonal management as a method of bringing together fishermen and those responsible for the economies of their regions, along with scientists. Striking evidence has shown that management formed on a more regional basis will be far more effective at delivering the benefits we want the revised common fisheries policy to achieve. I was struck by the suggestion put forward by the World Wildlife Fund to the effect that,
	"pilot regional or zonal management committees should be formed for all European regional seas".
	Have the Government considered pressing for such pilots, which could come into being well before agreement is reached on exactly how the CFP is to be reformed?
	One difficulty that we need to face on a national level is that, at the regional level, fisheries are seen rather as things apart. Funding streams are in place which take into account the restructuring of agriculture as well as the regeneration of towns. However, funding delivered through MAFF or rural development plans has never taken on board to any significant degree the restructuring funding that should be made available through PESCA, to which our chairman, the noble Earl, Lord Selborne, referred earlier. Our regional policy as regards all areas with fishing-dependent communities needs to take into account the more political question of whether such communities should continue to depend on fishing or whether they can diversify. If they do wish to diversify, then it is no good if fisheries money can be spent only on fisheries activities. Fisheries funding which comes from Europe needs to be spent in a relevant region on projects completely different from fishing. Otherwise, we shall never see adequate diversification.
	The fact is that regional dialogue is still in an infant form. If we are to see reform of the CFP by 2002, then as a nation we need to make the regions, government offices and RDAs far more aware of the kinds of actions they should be taking to make such dialogue more effective.
	I shall conclude by saying that I was extremely convinced by the case for regional management. It was favoured by many members of the committee. I hope that we as a nation could be at the forefront of demonstrating how effective regional management can be delivered. Furthermore, we should build on partnerships already established, for example, between parts of the south-west region and our fellow local authorities in France, where they, too, are facing the same kinds of problems. We could build on a great deal of common ground. If we were to adopt a common approach, then we should be able to develop strategies that will deliver a rounded policy for fishing in the future.

Lord Palmer: My Lords, I am sure that the whole House will be delighted to see the noble Baroness, Lady Miller, back in her place after the awful tragedy that she has had to endure. I feel particular sympathy for her as I narrowly missed having my daughter in a similar situation a few days later.
	I should like to pay an enormous tribute to the noble Earl, Lord Selborne, for chairing this committee. I feel that I have learnt a tremendous amount from his brilliant chairmanship. We were also most ably assisted by our Clerk, Mr Thomas Radice, and his assistant, Marilyn Byatt. I should like to thank them most sincerely for all their assistance so freely and courteously given.
	The noble Earl has probably said all that needs to be said about this report. However, I should like to emphasise one or two points. The whole subject of discards is one that worries me terribly, not only because of the dreadful waste, often of commercial species, equivalent to 40 per cent of the final landed catch--I repeat, some 40 per cent of the catch--but especially with regard to the damaging pollution of the seabed. Here I should like to quote one of our witnesses, Mr Venmore, who was a shell fisherman. He said:
	"That ground was then barren for three months because it polluted the sea bed and I could catch absolutely nothing".
	In this case he was referring to discarded mackerel.
	"That is happening throughout the whole of British waters. It is a crime, quite frankly, against humanity. It cannot be justified".
	I should also like to quote Mrs Murray, who, on page 74, stated:
	"That is why I say to you that it is absolutely essential that the United Kingdom Parliament actually grasps the nettle...and says 'Enough is enough, this policy is lunacy' and to safeguard not only our fishing industry but to safeguard the fish stocks, we do need to initiate some sort of domestic legislation. The fish stocks do not have the seven years that it took between 1976 and 1983 to actually negotiate an agreement with our European partners. They will not survive that long".
	A big part of the future of our fish supply, I am sure, lies in aquaculture, but fish stocks must also be preserved for our own and future generations, and that in turn means a complete restructuring of our entire fishing industry. I urge Her Majesty's Government to take action now before it is too late.
	I wonder how many people saw the headline in Fishing News on 19th January. It stated:
	"House of Lords EU Committee issues powerful warning--Whole Industry Could Disappear. A hard-hitting report by an influential House of Lords committee into the prospects for reform of the CFP concludes that the 17 year old policy 'has totally failed to achieve its fundamental objective of ensuring that fishing capacity and effort is consistent with self sustaining fish populations and food chains'".
	MAFF has been ignoring the seriousness of this situation for far too long and it must recognise that, sadly, the situation is not going to disappear overnight. I believe that action is required, and required now.

Lord Willoughby de Broke: My Lords, I, too, pay tribute to my noble friend Lord Selborne for his chairmanship of our committee. He was immensely tactful and had to reconcile some rather differing points of view from time to time. He can rest assured that he has produced a report which, as he said, does not pull any punches. That is obviously true to anyone who has read it.
	Like him, I am very disappointed that we are treading a well-worn path in this debate. Like our debates on the common agricultural policy, our debates on the common fisheries policy always seem to be very well received; they gain an enormous number of compliments and we are told how well regarded they are in both Brussels and in government circles. What a pity, in that case, that they never seem to be acted upon.
	The report we are debating today is a good example of what I am talking about. On page 9 of the report, Box 1 lists the previous reports of parliamentary Select Committees. There have been six of these since 1992, all increasingly critical of the common fisheries policy. This, our most recent report, turns up the heat even more. It is studded with conclusions that highlight the disappointment, and even anger, at the lack of progress--and, still, the apparent lack of political will to find a solution.
	The noble Lord, Lord Palmer, quoted from the report that the CFP,
	"has totally failed to achieve its fundamental objective".
	Paragraph 1 of the report continues:
	"This has happened despite repeated warnings from the International Council for the Exploration of the Sea (ICES) and despite reports from Committees of both Houses of Parliament and others".
	In paragraph 6 it states that,
	"disappointingly little progress has been made on the key recommendations of the earlier reports, and indeed in many respects the position is getting worse".
	Wherever we look we find that the common fisheries policy has been a disaster.
	In relation to capacity reduction, the report states that the Multi-Annual Guidance Programme IV,
	"has so far dismally failed to produce reductions in total EU fishing capacity, which on the contrary has continued to show net year-on-year increases".
	Even worse, British taxpayers' money is being used to modernise the Spanish fishing fleet. The noble Lord, Lord Hughes, said, of course, that we have to modernise. I agree--but we are paying to modernise the Spanish fleet, not our own. If we are going to modernise, let us modernise our own fleet, at least. Even worse--this is the contradiction at the heart of this matter--we are paying to modernise the Spanish fleet on the one hand, and also our money is being used to pay for effort reduction on the other. The two things are mutually contradictory. It is not just barking up the wrong tree; it is just barking, quite frankly.
	Effort control is another failure. The use of square mesh panels which would allow juveniles to escape was recommended by the Select Committee chaired by my noble friend Lord Selborne in 1992. It took eight years before the recommendation was acted upon--which is absurd--and then only in the North Sea and the west of Scotland haddock fisheries.
	Meanwhile, net sizes were not increased elsewhere. The Commission and the member states managed somehow to agree among themselves in December 1999 to allow smaller fish to be caught because the net mesh sizes were not reduced, thus ensuring that more juveniles would be caught, more breeding stock would be caught, the breeding stock would be destroyed and, therefore, scientists would say "There is a crisis here. They will have to become quota fisheries as well".
	The noble Lord, Lord Palmer, mentioned the scandal of discards. The illustration on the loose cover of the report is of a young boy, Andrew White, 16 years of age, holding up two fish. In one hand he is holding a nice big saithe--not as big as the noble Lord, Lord Hughes, is used to; it is not nearly as big as he is, either up or around, but it is nevertheless a sizeable fish--and in the other hand the boy is clutching a kind of super sardine, which turns out to be a whiting. In that picture it is the big fish that will be thrown overboard and discarded and the little fish that will be retained. That is absolutely scandalous.
	Enforcement is another major failure, I am sorry to say. I shall not be as squeamish as my noble friend Lord Selborne; I shall point the finger. We had quite convincing evidence that British fishermen are subject to strict enforcement at sea, whereas we had evidence from Dr Christian Lequesne that the French view was that "social peace" should be traded off for what he euphemistically called "flexibility on controls"--in other words, anything for a quiet life. "We'll leave you alone but do not debag the Minister". I have yet to hear of anyone who believes that the Spanish fishing fleet is properly policed. We had an example of its activities in Namibia. It is hardly surprising that under those conditions the British fishermen feel that they are seriously disadvantaged when it comes to enforcement.
	The overwhelming evidence we took showed that the common fisheries policy has been a failure, is a failure and will continue to be a failure. The Fisheries Minister's job, quite frankly, to quote a previous Minister of Agriculture, Mr John Gummer, is,
	"to ensure that if there are only ten fish left in the sea, you get your share and if possible a few more".
	That is not a policy at all. If it is a policy, it is a policy of despair.
	Whether we look at it from the point of view of the fishing industry, of fish stocks, of the environment or of social policy, there appears to be no prospect at all of the common fisheries policy being radically altered for the better. Indeed, I believe it can only get worse with enlargement, if it ever comes in. Then there will be more boats chasing fewer fish. I cannot see how that will lead to anything better than we already have.
	Britain's fishermen have been particularly harshly treated under this policy. That is borne out by documents released recently under the 30-year rule, in particular a Scottish Office memorandum dated 9th November 1970 which says of British fishermen that,
	"in the wider U.K. context, they must be regarded as expendable".
	That is very nice for British fishermen to hear, I am sure!
	If it is still the view of this House and of the Government that our fisheries are expendable, then we must agree that responsibility for our fisheries policy should remain in Brussels, in spite of the catalogue of failure that is the history of the common fisheries policy.
	The noble Lord, Lord Hughes, said that the common fisheries policy is all that we have. That is true. But there is an attractive alternative to jumping out of the window--it is not to jump out of the window. There is an alternative to the common fisheries policy; namely, to return control of our fisheries to Westminster. The principle of "equal access" to UK waters for EU fisheries was a political bargaining counter, to allow us to enjoy the manifold benefits of membership of the European Union. It had, and has, little to do with fisheries, conservation or social policy.
	We heard convincing evidence from a number of witnesses that national control of fisheries works. It is, after all, likely that with a fishery, as with anything else, if no one owns it, no one looks after it. Norway, Canada, Australia, New Zealand, Iceland, Greenland, Namibia and the United States are all examples of countries which have found ways of managing their fisheries that work--if not perfectly, then certainly much better than the shambles that is the CFP. Morocco can also be added to the list. The Moroccans have recently discovered that it is in their much greater interest to control their own fisheries than to continue in agreements with EU countries, particularly Spain, and they are refusing to renew those agreements.
	Britain's waters provide, or provided, about 75 per cent of resources for the EU fleet, as it will become in 2003. The example I have given shows that national control of fisheries can work; indeed this was supported by evidence from non-EU members of the North East Atlantic Fisheries Commission as to how it was possible for precautionary fishing bans to be declared in their waters within hours of receiving scientific advice. This requires a speed of executive decision-making that is quite beyond the bureaucratic abilities of the European Union and its institutions.
	I agree that fish do not respect national boundaries and that there must, therefore, be international agreements. But these should be intergovernmental. It is not necessary to have a common fisheries policy in order to have international agreements on fisheries. It should be possible--indeed it is possible, as in the examples I have mentioned--for an individual state to manage its fisheries and to have legal agreements with other nations which have an interest in and border on its fisheries.
	National control would enable the UK to licence all vessels to fish in our exclusive fishing zone. It would allow us to introduce and enforce agreed conservation measures. We should be able to introduce closed fishing areas immediately. It would enable short-term transitional aid to be paid as the enforcement measures bite. It would allow us at last to enforce our own rules, regulations and conservation policy.
	The reason the common fisheries policy is such a disaster is contained in a 1991 Commission report which is so self-condemning that it needs no further comment. The report states:
	"the fisheries sector will behave in a way consistent with the achievement of the European ideal".
	Exactly! That is what it is doing, and that is why it is such a failure.

Lord Judd: My Lords, at the outset I should declare an interest, as recorded in the report, as a trustee of the World Humanity Action Trust and as a member of other voluntary organisations concerned with the environment.
	I should like to begin by paying a warm tribute to the noble Earl, Lord Selborne, for his magnificent leadership in the committee. It is a joy to work with the noble Earl. His drive and spirit are quite special; they are matched only by his scholarship and knowledge. On this side of the House we ought also to say a word of appreciation to the Clerk, Tom Radice, and to the advisers for the sterling work they did in producing our findings.
	As I listened to my noble friend Lord Hughes of Woodside, I, too, thought of the witnesses, particularly those from fishing communities, who came before us in the committee. There was tremendous strength of feeling. However, what impressed me was that it was not only strength of feeling--I must honestly say that, perhaps a little surprisingly, there was a real willingness to face the issues and to face up to the scientific evidence that was being produced. But there was exasperation, because they believed that this was exactly what politicians were failing to do. What they wanted was a real sense of convincing direction. I believe that we owe it to close-knit communities that have served the nation so well to provide that leadership. We have seen similar situations in this country: we have seen the harrowing things that have happened to mining communities, steel communities and farming communities. In each of these situations, the most important discipline for us is to be able to speak forthrightly and honestly about what we believe needs to be done and then meet the consequences of following that through.
	There is a tendency in this House to use measured language and to be careful about not over-egging the argument. However, it would be difficult to over-state the gravity of the situation that faces us in fishing. It is a catastrophe. Stocks are diminishing, perhaps irreparably; and at the same time we have continuing over-capacity for the fishing operation. Drastic reductions in fishing are necessary, and firm regulation to achieve that is vital. If ever there were an example of international interdependence, it is to be found in fishing. Fish are no respecters of national or coastal waters or of exclusive zones. If we are going to manage the crisis that confronts us and survive it, we must work together as an international community. If we cannot start by handling this matter effectively on our own Continent of Europe, what prospects are there on the wider global stage?
	As I reflect on the report that we produced, certain priorities keep coming back to me. First, there has to be an agreed strategy. We cannot go on with an approach governed by tactics alone. There must be a strategy within which the tactics find their place--a strategy towards which everyone can work.
	My own view is that part of this strategy, eventually--perhaps not eventually, but very soon--needs to be on licensing fishermen, as distinct from trying to control the boats or equipment with which they work, so that we have a limited professional body of people working to an agreed strategy and taking their place within it. We also need to move towards zonal management--an aspect that is covered in the report--in which stakeholders, not least the fishermen themselves, have a part to play within the total overall strategy. It is by that kind of approach that we can build up a feeling of responsibility for the industry, for conservation and for all that guarantees the future.
	Then there has to be effective enforcement. It is extremely aggravating for fishermen who take the situation seriously, and who are themselves subjected to stringent regulation, to see others escaping such regulation.
	There must be strengthened enforcement. I can hear the words before they are expressed. The reservations we all have about bureaucracy and the European Union and about the overblown bureaucracy in parts of the European Union are known, but that is no reason for not strengthening European administration where it is needed. It is a sick joke that only 25 European Union inspectors are responsible for ensuring the policy is followed across the waters of the European Union as a whole.
	There must be convincing support for communities when the changes are implemented. That needs to be part of the strategy and clearly spelled out so that people know where they stand and can make plans for the future. I also believe--there has not yet been much reference to this--that part of this essential approach involves giving greater emphasis to aquaculture, not overlooking the dangers of parasites and disease, for example, and also the environmental problems inherent in aquaculture, but working to achieve a responsible approach to aquaculture which can boost and stabilise the stocks of wild fish.
	I come back to two general points which have already been mentioned in the debate which I believe are crucially important. First, I spent most of my professional life outside Westminster working on third world and development issues. I am appalled by what is happening to vulnerable small communities in third world countries dependent upon artisanal fishing as the irresponsible behaviour of Europe destroys their livelihood and the prospects of their families and communities. That matter deserves urgent attention. There must be far better co-ordination in Brussels between the development directorates and the agricultural directorates responsible for fishing and the rest. We also need to be certain that such co-ordination is strong in the counsels of our own administration and government in the United Kingdom.
	The second general point to which I want to return is the issue of the environment, which was well spelled out by the noble Baroness, Lady Miller of Chilthorne Domer. I sum it up this way--this is very much the way I look at agriculture as well--if we are taking the prospects of our children and grandchildren seriously in terms of inheriting any kind of environment worth living in, indeed, inheriting an environment in which it is possible to live, we must have a fundamental change of mindset. We must stop thinking about agriculture which has certain environmental responsibilities or fishing which must take the environment into account. We must have environmental policy into which we fit agriculture and fishing as part of our general management of the environment. Until we can get that discipline into our overall approach to policy, I believe that we shall always be trying to run up an escalator which is going down faster and faster out of control.
	There have already been assurances from MAFF and we look forward to its full reply. There has been emphasis on the indispensability of political will; our chairman has been right to emphasise this again this evening. I believe that in Elliot Morley we have a good Minister who understands the arguments and wants to do his best. But he is a junior Minister and he deserves the priority attention of senior Ministers who can really make things happen. What we need above all is clear leadership and honesty about what is necessary. There is no room any longer for fudging or for preoccupation with tactics because we are faced potentially with a terminal crisis in terms of the availability of fish stocks but also because if we take seriously our responsibility to those communities that have served us well, nothing would be more unforgivable than to fail to speak forthrightly and clearly about how grave the situation is and what needs to be done to put it right.

Baroness Wilcox: My Lords, I was honoured to serve on the committee under the able chairmanship of my noble friend Lord Selborne, so ably supported by Tom Radice, our brilliant Clerk. Our chairman was patient with me. He seemed to cope well with my sometimes furious, sometimes emotional, outbursts.
	Like the noble Lord, Lord Hughes of Woodside, I, too, was born to a seafaring family. My family has fished out of Plymouth in Devon for hundreds of years. At one time we were proud to say that we had the largest fleet of fishing smacks in the South West. We have always been inshore fishermen. Our communities are small and close. They share their inherited knowledge and skill. They know their waters intimately, and are dependent on them for food and for a living. We are not landsmen. Our houses are small; they face the sea and our wealth has been vested in our boats and equipment--an ever increasing cost in these days.
	Be it the great mid and deep water fleets of the east coast and the north as they face mountainous seas and freezing conditions way beyond the help of lifeboat crews, or inshore boats such as the ones that I have known, they have commonly worked with an element which is unpredictable. There are days and weeks when they cannot fish which makes them all the more dependent on their catches when they do. Restricted fishing is felt in more ways than one.
	As I entered the industry some 30 years ago, science and technology were about suddenly to leap ahead and revolutionise fishing as my family had known it, giving us the ability to take the guesswork, the hunting and the local knowledge out of fishing. There they were on the screen of the echo sounders and the fish finders for all to see, eerie in green on those screens, shoals of fish. It enabled us to rape and pillage those fragile stocks, disrupting breeding cycles, particularly in our area. I refer to pelagic fish local to my waters such as mackerel who swim in a tight shoal, sometimes miles long with the soldiers up the front and mature fish outside protecting the young ones inside. We swallowed them up in cod end nets pulled by big purse seiners down from Scotland. We crushed much of the catch. It was used for fish meal or dumped at sea, as the noble Lord, Lord Palmer, has so elegantly described.
	Attempts by the European Union to limit the damage that we did have so far left the United Kingdom with an ageing inshore fleet and a small in number but hugely efficient mid and deep water fleet bristling with new technology, mortgaged to the hilt and hungry for huge catches. Our boats are limited by the European Union's common fisheries policy's erratic attempts to restrain.
	Enforcement by the United Kingdom is vigorous. Certain other member countries, with fleets many times the size of ours, display little appetite for such enforcement and watch in amused amazement as our common law processes are applied to European directives. At present, enforcement is down to member states and we are not all playing by the same rules. Our report urges that the enforcement issue must be addressed. The noble Lord, Lord Judd, spoke eloquently on the issue so I shall say no more.
	As our chairman, my noble friend Lord Selborne, vividly outlined to your Lordships, the 17 year-old common fisheries policy has failed totally to achieve its fundamental objective of ensuring that fishing capacity and effort are consistent with self-sustaining fish populations and food chains. Our fishermen, who now share our once plenteous waters with member countries--some of whom have fished out their own waters through need or bad husbandry--are in a desperate state. Stocks in European Community waters are now at critically low levels. International scientists and parliamentary committees have given consistent warnings over the years. Our Government must lead the way for the United Kingdom and the European Community with a degree of political courage which has so far been lacking in all member states.
	Our report urges that more Community funding will be needed to ease the transition for our fishing communities facing loss of their traditional activities. Good applications of science and technology are now seeing the growth of sea fish aquaculture. The Sea Fish Industry Authority is having great success with its cod hatchery. The first 10 tonnes of product hit the market in 2000. It was but four years ago that your Lordships were minded to pass my Bill to license lobster ranching at sea. I have now opened the first national lobster hatchery at Padstow in Cornwall which will allow the local fishermen to take up licences and ranch those lobsters breeding with the natural stock. We hope to have replenished the local lobster stock by up to a quarter in four years. Scientists, traditional hunters, commercial producers like me and retailers can save the situation given the right encouragement.
	The key objective of the common fisheries policy should be sustainable development to ensure that the exploitation of marine resources takes account not only of ecological processes but also the social and economic consequences. Scientists, fishermen and politicians all know that action must be taken now. This is it--the reform of the common fisheries policy in 2002. It is our last chance. Member countries have their particular agendas and constituencies, as we have seen often to our cost. Small though the British fishing industry may be compared with other member countries, it has never been fought for in those quiet corridors of power where deals are done. To counter that, our Select Committee worked hard to publish this report ahead of the European Union Green Paper publicly to expose the problems that face us and encourage MAFF--it is acknowledged as having the best science in the European Union--to prepare our UK Minister to lead the fight to get the common fisheries policy set fair for the future before the whole fishing industry disappears forever.

Lord Perry of Walton: My Lords, unlike the noble Baroness, Lady Wilcox, I had no background in fishing until 1995 when I was appointed chairman of the sub-committee of the Select Committee on Science and Technology which considered fish stock conservation and management. Since then I have watched what I can only regard as a complete tragedy, and it is still continuing--the over-exploitation of another natural resource, like the over-exploitation of forests and oil.
	When considering fish stock conservation, we found that there was gross over-fishing throughout the world. At that time we were told by our expert advisers that only mature fish can spawn and thus contribute to the replenishment of stocks. However, fisheries were increasingly targeting immature fish so that the spawning stock steadily fell. For fish like cod, which take four to five years to reach maturity, the effect is particularly strong. By 1995 the spawning stock of North Sea cod was only 5 per cent of its value 20 years earlier.
	At that time we were conscious of the fact that in 1992 one of the world's most productive fisheries, namely, the Canadian Grand Banks cod fishery--it had fished continuously for 500 years--had been closed completely after a total collapse of stocks. Today, a decade later, there is little sign of recovery of that stock.
	We concluded our report with this paragraph:
	"In the United Kingdom and throughout the European Union regular supplies of fish are taken for granted, despite clear evidence of over-fishing. Only slowly is public opinion waking up to the fact that other parts of the world have been shaken, too late, from a similar complacency. Too little was done too late to preserve stocks of wholesome fish in the American Georges Bank, and in the Black Sea, and off the Canadian Grand Banks. Year after year, all over the world, the long-term sustainability of fish stocks is being sacrificed in favour of the short-term protection of employment in the fishing industry. But the lesson to be learned from the collapse of the Grand Banks fishery is that ignoring the warning signs year after year can end in the loss of thousands rather than hundreds of jobs. In their heart of hearts, scientists, fishermen, managers and politicians must all know that action must be taken now to prevent a repeat of the Grand Banks fiasco nearer to home. The question is, will they take it?".
	That was five years ago. When I was co-opted on to the current committee the situation was not better but worse. Many of the dire predictions of 1996 have proved correct. Overall, the situation is worse. Few of our recommendations have been acted upon. If they were, if was only after a long delay. I believe that that indicates the lack of political will which has been referred to.
	Our chairman, the noble Earl, Lord Selborne, has given an admirable summary of the report. I shall comment on only three issues: first, the proposals for zonal management; secondly, enforcement; and, thirdly, the social problems that will inevitably arise.
	We recommend that the revised common fisheries policy should establish zonal fishing zones. Proposals for such a change were made jointly by the Scottish Fishermen's Foundation and the National Federation of Fishermen's Organisations. They have been widely welcomed.
	Within each zone, a committee would be set up drawn only from those member states with existing fishing rights in that zone. It would include representatives of fishermen, fisheries scientists, environmental interests and fisheries managers. The committee would thus have a detailed knowledge of the local situation and would be able to respond rapidly to any crisis.
	I should very much like power to be devolved to such committees from the Commission, but we do not think that that can be achieved at the moment, so we envisage the committees as primarily advisory to the Commission. However, we considered that they should be empowered to take immediate action in any emergency to close areas where it seemed necessary to protect spawning stock or to introduce restrictions on fishing gear. Such changes currently take months, or even years, to impose.
	The committees would also propose medium-term management strategies for stocks in their zone. We hope that the endorsement of their recommendations by the Commission and the Fisheries Council would be automatic and that in the fullness of time further management powers would be delegated to them.
	Such a zonal management system would have various advantages. First, having a reduced number of member states controlling any fishery should make more rapid decision-making easier. Secondly, as all the interested parties would be members of the committee, the squabbles that have been common between fishermen and fisheries scientists over stocks would be resolved before decisions were made.
	Enforcement has been mentioned several times. Every member state has always had grave suspicions that it is the only one honouring the national responsibility to enforce the rules. For that reason, we recommend that member states should pool part of their enforcement capacity so that inspections at sea and on the dock can be carried out by a team drawn from at least two member states, appointed by and acting with the authority of the Commission. We also think that the current size of the Commission's inspectorate is woefully inadequate. That point has already been made.
	The necessary reductions in fishing effort will mean hardship and unemployment in fishing communities and related trades. There must be much greater expenditure on and investment in those communities throughout Europe. Structural funds should be redirected from providing subsidies for fleet modernisation, which has only increased fishing effort, to mitigating the effects of fishing reductions, which will cause unemployment among fishermen and others.
	I finish roughly where I started. The North Sea cod stock is close to collapse. I very much hope that the cod recovery plan that has been adopted will prevent that collapse, but I fear that it may have been left too late.

Lord Moran: My Lords, I was not a member of the committee that produced the report that we are discussing, but I took part in three of the earlier inquiries listed in the box on page 9 of the report, notably that which produced a 300-page review of the common fisheries policy in 1992 and that of the Science and Technology Committee in 1996. Looking again at those reports, which have been gathering dust in my store room, I am struck by the fact that, despite all that we said, things have evidently got worse, not better, in the past 10 years, as the noble Lord, Lord Perry, has just said.
	The 1992 report, nearly nine years ago, said:
	"The fishing industry in the European Community is suffering such acute problems that its very future is threatened. Chronic over-capacity in the Community fleet has led to consistent overfishing ... Fishing is becoming ever more intensive, with modern methods causing damage to the whole marine environment ... All witnesses agree that the current level of fishing effort is too high and could lead to the collapse of the stocks of some species of fish".
	Four years later, the 1996 report spoke of the world's fish stocks being in a state of crisis. We said:
	"A substantial reduction in fishing effort is urgently needed".
	We recommended the replacement of TACs by effort control, urged that scientific advice should be clearer to avoid providing an excuse for political compromise and said that we favoured a ban on all discards.
	The present report is clear, cogent and hard-hitting. One would expect that from the distinguished membership of the committee and its admirable Chairman, the noble Earl, Lord Selborne. I have listened with much interest to the speeches made by members of the committee. I was particularly struck by the speech of the noble Lord, Lord Judd, with whom I very much agreed.
	The report makes it clear that the advice and warnings given in the earlier reports have had virtually no effect. Its first two paragraphs are a damning indictment of the common fisheries policy. The report emphasises the irresponsibility of European politicians, including ours, who come back from meetings trumpeting their success in resisting cuts proposed by the scientists. It makes it abundantly clear that if we go on as we are, stocks of sea fish around our coasts, particularly in the North Sea, will very soon collapse, with cod going first and other species following soon after. Cod do not reproduce, I believe, until they are seven years old, so it will be years before there is any prospect of a real recovery. Not only will it be tragic that these great stocks of fish around this country will be wantonly destroyed, but the livelihood of our fishermen will vanish.
	Pages 14 and 15 of the report show that the CFP still ignores the effects of fishing on the marine environment and that, inexplicably, there is no liaison between the conservation interests in the commission and those responsible for fisheries. I very much agree with the comments of the noble Baroness, Lady Miller of Chilthorne Domer, on that.
	What needs to be done? I was struck by what Professor McIntyre told our 1996 inquiry. He said:
	"We know what the solution to the problem is, and that is simply to reduce fishing effort. If we doubted that at all we had the excellent examples of the two world wars, where for four years fishing effort was practically stopped. Before each of these world wars the stocks were in a poor state. Four years later they were in a first-class state".
	Despite our calls for a substantial reduction in effort, the EU has utterly failed to bring that about. The Commission's Director-General of Fisheries admitted to the Committee that, despite what it had been trying to do, the Community might have greater capacity now than five or 10 years ago. Boats are being taken out of service, only to be replaced by more modern, more efficient boats, often heavily subsidised by the EU. The evidence quotes ICES experts as saying that there was a need for a 40 to 60 per cent reduction of effort and nothing short of that would do any good.
	The 1996 report argued that the dreadful practice of discards--killing all the round fish thrown back--should be banned, but it still continues. As we heard when we went to Bergen in 1995, the Norwegians have a much better system and allow no discards.
	Practically nothing has been done to safeguard spawning areas, shown on the maps at pages 153 to 155 of the 1992 report. Probably half the North Sea needs to be closed to fishing for some years if stocks are to be given a chance of recovering. The system of total allowable catches--TACs--which in a mixed fishery leads inevitably to discards, needs to be replaced by effort control. There is no sign of progress on that as yet.
	Therefore, controlling fishing on a European basis has failed dismally for the reasons clearly set out in the report. The actions of the Commission have often been irresponsible, providing subsidies for new boats and even ending minimum landing sizes for 11 species, including turbot, lemon sole, brill, dab and flounder--a decision which understandably the committee found shocking.
	The EU has had 10 years to put things on a sound basis, but it has done nothing. The situation has worsened under EU management. I see no sign of any determination to take the draconian measures needed to secure the survival of so many fish species around our coasts and to give our fishermen prospects for a decent future.
	I do not believe that regional or zonal management to be approved at Community level, as proposed by the statutory conservation agencies--in effect, decentralising the CFP--would solve the problem, attractive though it sounds. It might be rejected by Brussels as implying a degree of discrimination.
	I conclude that we must remove the fisheries, or what is left of them, from European control. I do not have much confidence in our own capacity to put things right. The dreadful state of our railways, the fiasco of the Dome, the mess over the proposed partial privatisation of the Tube and of air traffic control do not suggest that this Government are capable of tackling a major problem such as this. But at least we could make a start by doing things differently and doing it ourselves--of course, collaborating with other fishing nations around us--without being swamped by Spanish boats and Danish industrial fishermen and living under the threat of foreign boats fishing right up to our beaches after 2002, when the current derogation comes to an end.
	Although popular, the Conservative call for being in Europe but not run by Europe is palpable nonsense. In this area we are at present run by Europe, as the Factortame judgment showed only too plainly. It is not only in relation to fisheries that we are told peremptorily what we can and cannot do. Mr Gordon Brown, for example, has just had a rather dusty answer from the Commission about his welcome plan to reduce VAT on the repair of churches.
	Like the noble Lord, Lord Willoughby de Broke, I believe that the time has come when we must take back the whole area of fisheries and place it under the control and responsibility of this Parliament. That is now very urgent if we are to save the North Sea cod and other species such as haddock, turbot and hake. Looking around the world, we can see clearly that the only really successful fisheries policies are those run by one country or one administration, such as Norway, New Zealand or, indeed, Namibia or the Falkland Islands.
	If we can repatriate our fisheries, as suggested in some of the evidence to the committee, by a parliamentary Act reclaiming our 200-mile or median line limits, as laid down in the Fishery Limits Act 1976, all well and good. If not, we may need to arrange a new relationship with Europe, as I have often suggested in other contexts in your Lordships' House. That would enable us to break free from the shackles of the common agricultural policy and the common fisheries policy.
	Such a new relationship with the EU, similar to that enjoyed by Norway, Switzerland and now Mexico, would give us much happier relations with Europe, save us huge amounts of money and give us a much better future. I am not surprised that, according to the polls, 46 per cent of our people now want us to leave the EU. Reading this report on the state of one of the major planks of the EU, one can only conclude that they are right.

Lord Stoddart of Swindon: My Lords, I believe that British fishermen can take some comfort from what is a thorough and forthright report. I join other noble Lords in congratulating the Select Committee on its report. The members have been meticulous in their search for a solution to the problems of fishing, as they have been in the past. Unfortunately, little notice seems to have been taken of their previous reports.
	I very much welcomed the trenchant remarks of the chairman, the noble Earl, Lord Selborne. I believe that if I had made the type of remarks that he made, I would have been accused of being an anti-EU zealot. But, of course, the remarks were made by the distinguished noble Earl and I hope that a great deal of notice will be taken of them.
	The noble Lord, Lord Willoughby de Broke, mentioned the disclosures under the 30-year rule. He is absolutely right that Britain was swindled out of her national fishing industry with the connivance of the then government, led by Mr Heath. It is quite outrageous that an elected government should have believed that a great industry was expendable and, indeed, that they should have been prepared to take measures and make agreements which would ensure that it was expendable. Even worse, we have continued to expend the British industry while, to add insult to injury, the British taxpayer has helped to build up the Spanish and Portuguese fishing industries, which have then depredated fish in British waters. That was the result of that particular policy at that particular time.
	What is worse, this British Parliament is precluded from taking action to safeguard the livelihoods of British fishermen. As we know, if they dared to do so, they would be taken to the European Court of Justice and fined. Thus, we have witnessed the spectacle of the British fishing industry being almost destroyed. The industry has been in decline and fish stocks have sunk, in many cases to crisis proportions, because of the disastrous policy which could have been avoided had we had a decent and courageous government who were not prepared to give away anything in pursuit of their policy of entering Europe.
	Like the common agricultural policy, the common fisheries policy--the only two common policies that we have--has been an absolute disaster. Yet they continue to be supported; indeed, they have to be supported because of the acquis communautaire--the absurd doctrine which insists that a power gained by the European Union must never be relinquished, however absurd and damaging it becomes. Yet something must be done. Many noble Lords have said that we must take back control of our fishing industry, our fisheries and our fishing waters because they are being so mismanaged by the European Union.
	Members of another place and of this place, and Ministers in particular, should remember that they are here to protect and further the interests of British people and to give priority to them rather than to those of other countries or the nationals of other countries. They certainly cannot do so under the common fisheries policy. Because of qualified majority voting, under that policy the claims of other countries now appear to take precedence over the best interests of our own with dire results for our fishermen and our fishing industry. As my noble friend Lord Hughes of Woodside and other noble Lords remarked, that is to the detriment of consumers because it causes shortages and higher prices.
	The CFP has certainly not achieved its objectives. Conservation was one objective, but it has certainly not been achieved--indeed, the effect has been positively harmful, because quotas in areas of mixed fishing have resulted in pollution through discards, as the noble Lord, Lord Palmer, explained. Industrial fishing has also caused a loss of fish stock through over-fishing and by depriving fish of their food.
	It is surely evidence of failure when cod, of all fish, is declared an endangered species. Fishing has been banned for a period to allow replenishment of stock. At the same time, industrial fishing goes on apace in the same areas.
	Fishing capacity was supposed to have been reduced. British fishing capacity has certainly been reduced, and will be reduced further. However, the Spanish fleet, which is already the biggest, has been allocated large funds to upgrade, modernise and enlarge itself. The British fleet, in contrast, will be reduced by a further 800 vessels.
	Even worse, as we heard from my noble friend Lord Judd, who is an expert on these matters, EU funds have been used to buy fishing rights in developing countries. That is to the detriment of very poor indigenous fisherfolk, who depend totally on fishing for their livelihood. That is the new European imperialism--it involves colonisation not by Bible and gun but through bribes, often to corrupt tyrannical governments who misuse the funds provided. Although Britain gets no benefit, we pay thousands--in fact, millions--of pounds towards the cost of that disreputable policy.
	As I have already said, the EU takes little note of the findings of Select Committees. Its attitude will doubtless not change with regard to this report, although I sincerely hope that it will. However, it is increasingly clear that all successful fisheries policies are run and enforced by national governments, who are able to make mutually beneficial reciprocal arrangements with other countries.
	In paragraph 120 on page 26, the Select Committee report baldly states: "The CFP is failing". Indeed, the report is entitled, Unsustainable Fishing. Paragraph 126 states that the dire predictions that the Select Committee on Science and Technology made in 1996 have "proved accurate".
	The committee asked whether the EU Green Paper will at last call for appropriate measures and whether the Council of Ministers will have the will to act. If past experience is anything to go by, it will not have that will. What then? What will happen if the Green Paper is not successful and the political will is not there? Will the Select Committee recommend that whatever the rest of the EU says, we should recover control over our own waters? Even if it did, is there any chance that our supine EU-orientated political leaders will do the right thing by British fishermen and consumers? That involves taking that action, irrespective of what our EU competitors or partners--whatever we choose to call them--say.

The Earl of Onslow: My Lords, I begin by congratulating the noble Baroness on becoming the minister for the horse. We can now say to her, "Gee, Minister". I could not resist making that awful joke, for which I apologise.
	This has been one of the most inspiring debates to which I have ever listened, but it has also been one of the most depressing debates to which I have ever listened. That is not because people do not have knowledge--the knowledge is enormous and the intellectual effort has been great--but because this is a story of failed listening.
	The noble Lords, Lord Palmer and Lord Stoddart, talked about discards. I want to add to that debate by discussing sand eels. The Danes have a quota that allows them to catch 1 million tonnes of sand eels a year. They are used to heat Copenhagen, to fertilise the Jutish Plain and to feed livestock on pig, poultry and salmon farms. As a result of that quota, the Danes are entitled to what is called a 20 per cent by-catch. That affects 200,000 tonnes--I stress that figure--of baby cod and other little fish, which simply get destroyed. That is two and a half times the quota allocated to Scottish fishermen, which is for 75,000 tonnes of mature cod for consumption. In fact, the situation is worse than that. The cod that are caught are small and it takes many more of them to make up a pound or a tonne of cod.
	A policy of industrial fishing has applied in the Berents Sea. In due course, the cod vanished and industrial fishing stopped. In 10 years, the cod came back and there is now a plentiful supply of cod in the Berents Sea.
	It is hard to over-exaggerate the damage that that approach will do. That is illustrated by the fact that although the Danes have a quota of 1 million tonnes, they cannot catch more than 385,000 tonnes. The more that one hears about such cases, the more ghastly the situation becomes. The other day, someone--not me--was listening to the Danish news in Danish. They heard some cod fishermen from Thorsminde--I hope that I pronounced that correctly--admit to chucking 50 per cent of what they catch over the side. There is a premium on large cod, so the fishermen go on catching until they catch large cod and chuck all the small cod over the side. They admit to a 50 per cent discard, so the real figure is probably much bigger. They also said that their quotas are not sufficient to live on--the Aberdeen fishermen say exactly the same. Throwing mature, edible fish over the side because fishermen want bigger fish involves the most appalling waste.
	When the picture on the front of the report was drawn to my attention, I was deeply shocked. It is one of the most depressing but most illustrative pictures I have ever seen. The large fish will be thrown away and the little fish will be eaten. Is it possible to imagine a sillier scheme than that?
	During the past year or so, the 44 per cent decrease in Aberdeen's cod quota has already caused four companies to go out of business: Marson and Gerry, Allen and Day, Marine Fisheries and Abacus. It is suspected that a further 10 companies will go out of business as a result of the mismanagement of our stocks. On occasion, the EU admits to 60 per cent discards. Therefore, there are discards of 100,000 tonnes for the 75,000 tonnes which we are allowed in Scotland, plus the 200,000 tonnes which are allowed in relation to the sand eel fishing. That comes to a staggering total of 300,000 tonnes thrown away.
	If I have a criticism of the report, it is that insufficient emphasis is placed on the appalling damage which discards do. None of those discards can breed, nor can they be eaten. As has been said by the noble Lord, Lord Palmer, they merely pollute. It is difficult to exaggerate the horror of it.
	The Norwegians have a perfectly decent system. You are made to land everything. It has been said in the report, and it is admitted, that it is extremely difficult to police that system. But at least it is worth trying. If people are caught, you can throw the book at them and if the book is heavy and large enough and a couple of guys lose their boats as a result, they will not offend. Surely that is the way to go about it.
	If there is a quota of one tonne of cod in Norway and you land one tonne and a quarter, you are paid for a tonne and the other quarter is taken away and sold on the open market. Therefore, there is no benefit to you from over-fishing. There is a direct incentive to you to fish very carefully indeed and to make sure that you are sensible about mesh sizes, square meshes rather than round meshes, and so on. You only catch exactly what you want. Surely that is the way in which we should go.
	The cod recovery scheme was announced the other day. A European fisheries official was asked whether industrial fishing would be stopped during the cod recovery scheme. He replied that not to do that would defeat the object of the cod recovery scheme. A very little time later, somebody had obviously got at him because he came back and said that he was sorry, it would be allowed because it was thought that the effects would be marginal. I have asked the noble Baroness, Lady Hayman, to find out about that. I spoke to her office this morning and I am sure that she will have done everything possible to find out about it. But what caused the change of mind?
	Unless we get this right, as everybody has said, there will be no more fishing. Let us remember:
	"Little fish are in the sea
	For bigger fish to bite 'em, The bigger fish bite other fish, And so ad infinitum". Unless we get it right, the North Sea will be a stagnant pool surrounded by derelict fisheries communities and we shall not be able to have fish and chips. It is possible to get it right if we are sensible. But there is no evidence of anybody being sensible. Let us be honest. The Canadians, the Norwegians, the Icelanders, the Namibians and the New Zealanders all run sensible fisheries policies. I admit that as regards the Grand Banks, the Americans and Canadians learnt the hard way. But in Europe, we seem determined not to learn.
	I believe that marginally--just marginally--I should prefer a common European fisheries policy, just. But I am certain that I do not prefer a stupid European fisheries policy. If we are not to have a sensible fisheries policy, we must say, "I am very sorry, 75 per cent of the waters are ours and you are wrecking the whole thing. You do what we say. We shall produce a sensible policy and if you do not like it, we will do it on our own. In other words, you can have our co-operation, which we shall willingly give, but we are not prepared to see our own environment and our own assets ruined and destroyed".
	In my 29 years in this House, I do not believe I have ever heard such a damning speech as that made by my noble friend Lord Selborne. That speech alone justified his election to this House. His chairing of this committee has obviously been excellent. I hope that the noble Baroness can give us a good, robust and well thought-out answer. I know that she is capable of it. I hope that she will do it for us.

Lord Pearson of Rannoch: My Lords, having saved your Lordships a further four-and-a-half hours of debate considering the delightful prospect of the implications of withdrawal from the European Union, I hope that I may be allowed rather less than the four minutes permitted by the Companion to intervene before the wind-up speeches.
	I should like to mention two points which perhaps have not been fully made. One of them is that the common fisheries policy is not yet the fully fledged EU fishing policy, under the Commission's total control, which has been designed. This present policy, which we have been discussing for so many years, consists of a number of derogations to that grand policy which will not come into being until 2002.
	Having listened to the whole debate with much respect and fascination, I noticed that all noble Lords have said that something must be done and some noble Lords have said it more forcefully than others. But I suggest that nothing can be done under the common fisheries policy because to change it requires unanimity among all the member states and that unanimity is just not available. It is not realistic to talk about changing that policy. If the Minister disagrees with me, can she say whether the Government think that there is any possibility at all that Spain, for example, would agree to the kind of changes that we require?
	That is why several noble Lords have wisely demanded the only solution to this policy, which is the repatriation of the common fisheries policy. But that is not so easy either. We shall be told that it is impossible. Indeed, when the Conservatives, a year ago, said that they were going to make repatriation of the common fisheries policy part of their next manifesto, my right honourable friend the Leader of the Opposition was taunted by the Prime Minister in the House of Commons, who said that that would mean inevitably leaving the European Union altogether.
	Of course, some of us think that that is a very pleasant prospect and that the case for leaving the European Union is unanswerable. But I have to admit that our political establishment is not yet ready for that obvious move.
	I have a suggestion for Her Majesty's Government which centres around the negotiations that have just taken place at the Inter-Governmental Conference in Nice. It is clear that we need some form of deal to repatriate the common fisheries policy without tearing up the Treaty of Rome into very small pieces and chucking it into the Tiber.
	I point out to the Government that we are in the process of giving eight countries in the European Union something that they very much want and something from which we have had nothing in return--that is, the famous enhanced co-operation arrangements in the Treaty of Nice. We have given them that and have received nothing in return.
	I suggest that before we sign or ratify that treaty and its related initiatives we should demand back our fisheries and our agricultural policies. If they do not give us those policies, they cannot have enhanced co-operation. That is the sort of deal that they understand. I believe that that is the minimum that we should require for giving them this opportunity that otherwise they could not have.

Baroness Byford: My Lords, I thank the Select Committee on the European Union for its excellent, thought-provoking, informative report. Reading it made me slightly ashamed that hitherto I had not fully understood the situation. I say that quite openly because the noble Lord, Lord Mackay of Ardbrecknish, used to speak on fishing matters on behalf of our party and on his promotion I have taken up the responsibility.
	Noble Lords have said that they feel that the report is hard-hitting and direct and I am delighted that it is. I pay tribute to the noble Earl, Lord Selborne, for leading the committee and for their excellent report.
	It is clear that the current system is not working. The forthcoming Green Paper is of crucial importance in relation to the debate. The report, as all noble Lords have reflected, does not pull its punches. The noble Lord, Lord Judd, referred to the gravity of the situation, as has been reflected on all sides of the Chamber.
	The common fisheries policy does not help with conservation or with the management of the industry. It certainly does not help British fishermen who, at the moment, are struggling to make ends meet. There has to be a balance between too much capacity and too few stocks. As the report says, we need to look at the fundamental reshaping of EU policy for fishing communities that feel let down. As other noble Lords have said, Europe is not able to react quickly, a point I shall return to later.
	Is it feasible that a community of 15 states, two of whom do not even have a fishing fleet, can provide the leadership necessary to cope with the situation, for example, off the west of Scotland or in the Celtic or Irish seas? I suggest that that will be even more difficult following the expansion of the European Union.
	In the conclusions and recommendations at paragraph 100 of the report the committee refers to zonal management, which the noble Lord, Lord Perry, mentioned. It concludes that there would be considerable benefit, such as more appropriate management regimes, better communications and improved enforcement of regulations. As they have recognised the need for improvements, like the noble Lord, Lord Perry, I want to touch on the zonal management proposals put forward by the Scottish Fishermen's Federation and the National Federation of Fishermen's Organisations.
	Those proposals split the European waters into six zones, to which I hope the Minister will refer later. Each of the zones will be managed by a committee of country representatives; 11 for the Baltic, nine for the Celtic and Irish seas; eight for the west of Scotland; seven for each of the North Sea, Biscay and Iberia; and four for the Mediterranean. No one country would be represented on the management committee of all six zones. There would be four EU and five non-EU countries on one; one EU and one non-EU country on two; one EU country on three; five EU countries (Belgium, Denmark, Germany, Spain and the UK) would be on four; and only France and the Netherlands on five.
	Surely that is more likely to succeed as a management arrangement than 15 countries trying to run the whole region. Perhaps the Minister will comment on that. The Government have also had discussions on empowering such groups if they are to be established. Again, I ask the Minister to comment on that.
	To a certain extent I accept the comment made by many noble Lords that the debate has been informative but depressing, as I believe the report is. The report is realistic and does not duck the issues. Perhaps I may touch on one or two points that have been raised that I believe are extremely important.It is quite clear that the current system has totally failed us and that we need to consider what else we can do--a point raised by the noble Lord, Lord Moran.
	I searched in the report for ideas about enforcement. I hope I do not do the report an injustice when I say that it reflects on the difficulties of enforcement rather than considers how the problem can be overcome. I hope that the report will allow us to consider what can be done for the future. My noble friend Lord Willoughby de Broke was slightly depressing in his remarks on enforcement. He said that there is flexibility on controls and that certain countries interpret them in different ways. Those of us who deal with the CAP reforms would reiterate the difficulty. However, the fact that difficulties exist does not mean that we should duck the issue. The important point that has emerged from today's debate is that we must attack certain issues.
	Almost every speaker has spoken with dismay about the question of discards, a matter to which I have given a lot of thought. As I have already said, I have no expertise in fishing. However, even if I had, I hope that I would find the practice of discarding dead fish by returning them back to the sea totally reprehensible and unacceptable. Surely it is not beyond the wit of this country to lead the way by devising a set of rules that will stop this appalling practice and criminal waste.
	Various suggestions have been made. I mention one or two: the introduction of closed areas; an increase in mesh sizes; the use of square panels and trawler separators; greater selectivity of catch; the tackling of mixed fishery, as opposed to considering the demise of cod stocks alone. There are two particular problems relating to discards--undersized juveniles and over quota fish. We desperately need to reduce the kill of undersized fish. Several noble Lords have referred to the fact that the Norwegians do not allow the practice of discard.
	Paragraph 96 of the report refers to Scotland's option of square mesh panels, to which I have briefly referred. It was stated in last week's debate in another place, and repeated here today, that this has already resulted in a reduction of 20 to 40 per cent in the catch of juveniles. I echo the committee's view that the timescale for the adoption of this and other conservation measures needs to be immediate and that they need to be enforced.
	With regard to juvenile fish and fish that are too small, sometimes there are real time closures, perhaps followed by a trial trawl. I believe that in some areas the area is closed, a trial trawler is sent in, and, if the fish are still undersized, fishing is not allowed to restart. However, fishing is allowed to recommence when the fish are considered large enough. Perhaps the Minister would respond to that. The noble Lord, Lord Onslow, gave some very sad examples of the discard of cod.
	Today's debate has reminded me of a comment made by a friend of mine, an amateur scuba diver on the west coast of Scotland, about trawling vessels culling fish, mooring lines, anchors and rocks, and causing damage in the form of large grooves in the seabed--something about which the noble Lord, Lord Judd, would know--in which nothing can then grow. I hope that the matter can be considered. Not all noble Lords have referred to beam trawlers, which perhaps cause severe damage, although others argue that they do not. Whether or not they do, we should surely obtain a clear, scientific opinion on the matter.
	In that connection, I should like to draw your Lordships' attention to appendix 6 on page 37 of the first part of the report. Mollusc dredgers, which may cause long term environmental damage, should surely be outlawed under the precautionary principle. Perhaps the Minister will enlighten us as to whether they are used in the six and 12 mile limits and whether the Government have any thoughts on that matter.
	I turn to the question of finance. The report is stinging in its recommendations 92 to 94 on the financial instruments for the fisheries guidance. Restructuring requires resources. Training in new ways of earning a living for those who lose their jobs and investment in marketing and new applications are desperately needed. Support for implementing, monitoring and enforcing new rules is required. When fishing, fishermen are often forced to make decisions in favour of their short-term, economic interests, which are not in the long term interests of stock or the fishermen themselves.
	The noble Earl, Lord Selborne, said that we must have the political will to take on these and other issues. Above all, there must be financial support for those who continue in the industry, but perhaps with a new vision which balances environmental issues.
	In the context of finance, many speakers in last week's debate in another place pointed out that no other industry must operate on such a short information cycle, even allowing for short-term planning. In education, for example, indicative school budgets are announced at about this time for the next financial year. In the fishing industry, quotas are announced just before Christmas and implemented from January. Is such a system sensible and do the Government want to continue with it?
	The point was made in paragraph 94 that not only should support for capacity reduction be made available only when a vessel is scrapped but that all support should be tied to some form of decommissioning. That is necessary to ensure that where it is no longer possible to catch previous levels of, say, white fish the fleet does not turn to the destruction of other fish or move to fish in the areas of third-world countries, referred to by the noble Lord, Lord Judd.
	I want to conclude by endorsing wholeheartedly the point made in paragraph 112 which refers to the inspections at sea and in the dock by multi-national teams. Other noble Lords referred to the 25 inspectors as being totally inadequate. My reading and preparation for the debate has left me much more aware about the ease with which anyone who wants can flout the regulations. We must put in place a new form of regulation which ensures that that does not continue.
	I want to make two further comments. The debate has been of great value and noble Lords have spoken with great expertise. Although depressing comments have been made I want to thank my noble friend Lady Wilcox for bringing us hope for the future. I am delighted to hear of the launch of her national lobster hatchery. Perhaps next time we shall hear other such announcements because after this slightly depressing debate we need to hear good news. We are at the crossroads and if we do not take the necessary steps immediately we shall be too late.
	Finally, I want to comment on the environmental issue, mentioned by the noble Baroness, Lady Miller. Two or three of us in the Chamber took through the Countryside and Rights of Way Bill and were delighted that it included the biodiversity action plan. Indeed, we tried to raise a similar plan in connection with marine life. I wonder whether the lack of understanding about what is happening in our seas is a case of "out of sight, out of mind". The public know what is happening on the land because they see it but they do not see what is happening under the water. I congratulate all noble Lords who have taken part in the debate and I hope that it has raised awareness of this and other issues.

Baroness Hayman: My Lords, I join all noble Lords in congratulating the noble Earl, Lord Selborne, on the report provided under his chairmanship and on his lucid introduction to the debate. It has been a well informed and passionate debate. That is right and proper because, as many noble Lords have pointed out, fisheries are an important area of EU policy and important to the livelihoods and futures of individuals and communities. It is right to recognise that in relation to the more abstruse issues in the technical debates.
	I was grateful to the noble Earl for recognising in his introduction that, in replying to a recently published report, it is perhaps inevitable--I am sorry if I disappoint the noble Earl, Lord Onslow--that the Government's response from the Dispatch Box tonight, like the note supplied to the sub-committee prior to the debate, is somewhat tentative. But the real value of the debate lies in considering the matter now and allowing the contributions to inform the final response of the Government in the fullness of time.

The Earl of Onslow: My Lords, I believe that to be very wise. It means that the Government will listen to what people say before they make up their mind, rather than go out on a limb, make idiots of themselves and find that they are unable to withdraw it. That happens when either party is in power.

Baroness Hayman: My Lords, I am grateful to the noble Earl. I thought that earlier he sought to tempt me into making definitive statements of policy.
	It is important to take into account the fundamental issues that have been raised in the debate, not only in terms of the Government's response but, perhaps most crucially, the forthcoming Green Paper, to ensure that they are heard at European level. There has been a good deal of debate about the importance of political will. We are dealing with a common fisheries policy--we shall talk later about its appropriateness--where political will is required across the Union, including the United Kingdom.
	The forthcoming review of the common fisheries policy provides a mechanism to deal with the real and increasing problem of managing our fisheries internationally. Even though it has fallen short of earlier hopes and expectations in many areas, as eloquently described tonight, that mechanism is there and the forthcoming review in 2002 provides us with an opportunity to make the necessary changes.
	It is absolutely clear, as the noble Earl, Lord Selborne, said in introducing the debate, that the common fisheries policy must have at its heart the notion of sustainable development. The committee's report proposes that,
	"the exploitation of marine resources [should] take account not only of ecological processes but also social and economic consequences".
	That encompasses all the fundamental principles of sustainable development and recognises that fisheries management is not just a question of conserving resources. Decisions on fisheries management have to find a workable equilibrium between all the requirements and must have that comprehensive approach to which my noble friend Lord Hughes of Woodside and others spoke. In that comprehensive approach over-capacity remains a central problem for the common fisheries policy, which we all accept has so far not been tackled sufficiently effectively by EU structural policy.
	The Council of Ministers has already begun to consider the future of the structural policy, and the Government have pressed the council to take more effective measures. We argue for a reversal of the current EU policy because we believe it is wrong to allow subsidies which tend to add to the problems that already exist. In particular, we oppose grant aid for the building of new fishing vessels. The UK does not give such grants and regrets that other member states do.
	However, it will not be easy to strengthen EU policy in this area. In the past the council has been reluctant to accept sufficiently tough fleet reduction targets. We look forward to effective proposals in the Green Paper, but it is wrong to suggest anything other than difficult negotiations ahead in this area. In that respect, my noble friend Lord Hughes of Woodside asked about our own national compliance with obligations under the current structural policy MAGP IV. We have already reached our overall tonnage objective set for the end of this year. We are on course to meet our obligations for individual fleet segments. But we agree that these targets will not resolve the over-capacity problem.
	Several noble Lords have put the case for giving financial aid to the fishing fleet. The Government appreciate the impact that successive quota restrictions have placed on the fleet, together with the impact of the new recovery plans for cod and hake. Ministers are urgently discussing with the industry the implications of these measures. One possibility is decommissioning to remove surface capacity from the fleet. There are other possibilities of structural measures of various kinds. These issues are being looked at in relation to various parts of the United Kingdom. We are in close contact with the devolved administrations on this issue. The need to have a coherent approach to policy is well appreciated in the light of the points made by the fishing industry.
	Several noble Lords emphasised the case for socio-economic restructuring programmes to provide alternative employment opportunities for those leaving the fish industry. The Government agree that there is an important role for such funding, but a substantial programme of grants is already available. There are the DfEE employment and reskilling initiatives. The main EU structural funds include the European Social Fund. Most fisheries-dependent areas in England are within the Objective 2 regions and are thus eligible for European Regional Development Fund support. Regional selective assistance and enterprise grants are also available to help local communities readjust.
	The noble Baroness, Lady Miller of Chilthorne Domer, the noble Lord, Lord Moran, and others spoke of the need to focus on the protection of the marine environment. It is clearly the case that there needs to be an improvement in environmental integration within the CFP. That is a Commission priority for the forthcoming review. It is one that we have advocated and MAFF is funding research.
	The Swedish presidency is moving the process forward and has produced a paper outlining possible presidency conclusions on the topic. That forms part of the Cardiff process and is due to be submitted to the Gothenburg European Council in June. We will do our utmost to assist the presidency in this area. We have noted the various suggestions that a great deal more should be done environmentally. Progress has been made and we shall certainly be looking to create a much stronger environmental framework for fisheries. We envisage provision to promote environmentally-friendly fishing as part of the structural policy. There are parallels elsewhere of the importance of integrating those two areas of policy.
	One cannot talk of environmental issues without also mentioning the problem of discards. The noble Earl, Lord Onslow, the noble Baroness, Lady Byford, and the noble Lords, Lord Moran and Lord Palmer, raised that issue. The report of the committee noted that a simple discard ban would not be effective. We agree that the most promising way forward must be to adopt a combination of approaches.
	The updated technical conservation rules which came into force on 1st January 2000 have attempted to address part of the problem of discards by focusing on the selectivity of fishing gear. The need to do even more has been recognised in the new arrangements for Irish Sea cod which apply from 1st January 2001 and in the North Sea/West of Scotland cod and northern hake recovery plans. Both of these plans include larger minimum mesh sizes and restrictions on twine thickness; measures that improve real selectivity.
	The noble Baroness, Lady Byford, suggested a number of technical issues in this area. We have noted the reference to the range of issues that could reduce the levels of discard and environmental impact. All of them are relevant and form part of our approach to conservation.
	The noble Earl, Lord Onslow, specifically raised the question of the provision for the sand eel fishery to continue under the North Sea cod recovery plan. The noble Earl very courteously gave me notice that he would raise the point. My understanding is that it arose because Denmark was keen to provide continued fishing opportunities for its vessels in the light of agreeing to the closure of a significant part of the eastern North Sea. Denmark argued that because the sand eel fishery takes place near the surface, the cod by-catch was very low, at around 2 per cent. The Commission accepted that and the fishery was therefore excluded from the prohibition. The size of the total allowable catch for sand eels in 2001 was set, like all other TACs, at the December Fisheries Council. It remains unchanged at 1 million tonnes, in line with scientific advice. No special deals were cut with the Danes. Moreover, the Danes are open to the possibility of reducing the sand eel TAC and limiting the by-catch provision for white fish. We have agreed that we will discuss this with them and the talks are scheduled to start shortly.
	The noble Earl quoted figures for the impact of sand eel fisheries. I am informed that they were interesting but very speculative. The reality is that Denmark catches a great deal less than the total quota. It is also the case that the by-catch of white fish is only a much smaller percentage than the figure implied in the regulations. That is why Denmark has readily agreed to discussions with the UK on changes to the regime.
	I turn from the technical to the very general. There were references in the debate to the possibility of our withdrawal from the common fisheries policy and indeed clarion calls for it from the noble Lords, Lord Willoughby de Broke, Lord Moran and Lord Pearson of Rannoch. We have to understand that proposition in the context of the undeniable need to co-operate fully with our neighbours on fisheries management, especially when fish stocks are low. The committee itself advised that a common policy of some kind is essential. It is the Government's view that calls for withdrawal from the CFP are not only unrealistic but could also be highly damaging. How would it promote a co-operative approach to conservation, as we have achieved, for example, with the North Sea cod recovery plan? How would it deal with the problem of over-capacity? How would it tackle discards or help with technical conservation measures? How would it lead to more involvement of fishermen in decision-making processes? The answer to each of those questions is that it would not.

Lord Pearson of Rannoch: My Lords, perhaps I may press the Minister on that point. My noble friend Lord Willoughby de Broke said that before we were deprived of our fisheries somewhat deceitfully by Mr Heath when he took us into the common fisheries policy in 1972, the United Kingdom controlled some 75 per cent of the fish in what are now EU waters. I thought that the figure was nearly 80 per cent. If we withdrew and took back that 80 per cent, surely at least 80 per cent would be controlled by us and 80 per cent of the environment could be under our control. When the fish stocks had recovered and we had looked after the needs of our own fishermen, we could lease any surplus to others.

Baroness Hayman: My Lords, the noble Lord makes it sound very simple. When I had my seminar on this subject with my honourable friend Mr Elliot Morley, he assured me that some of the figures and propositions that have just been put forward are not achievable. Perhaps I may make one point about the document relating to the former Conservative administration which was released under the 30-year rule.Whatever might have been the policies then, and whatever are the policies now advocated by the Opposition, we do not regard the fishing industry and fishing communities as expendable. That is why we are addressing the review of the common fisheries policy with great care, thoroughness and firm political will in order to secure the kinds of changes that are necessary.

The Earl of Onslow: My Lords, if we cannot secure any changes then that is the problem. If, on balance, we agree to a common policy, what happens if they continue to behave like purblind fools? Are we to allow that to happen? That appears to be our option.

Baroness Hayman: My Lords, we also have an option to cross bridges when we come to them. At the moment we should concentrate our efforts on achieving effective reform of the common fisheries policy. That is what we are doing.
	We believe that there is scope for improving the decision-making processes under the CFP and bringing it closer to those affected by it. To that end, the contributions to our debate covering zonal management from my noble friend Lord Judd, the noble Lord, Lord Perry of Walton, and the noble Baroness, Lady Miller of Chilthorne Domer, all made clear the benefits of a more regional approach. It will offer greater opportunities for greater efficiency in decision making, more ownership of the issues, increased involvement of those directly affected by decisions and the decision-making process, and heightened scope for reacting speedily. Several noble Lords made those points, as well as referring to conservation and other emergencies.
	We believe that it will be possible to develop a considerable role for regional management arrangements, while respecting the current institutional and legal framework of the European Union and the need for all member states to retain a role in relation to European legislation. I noted the suggestion put forward by the noble Baroness, Lady Miller, that a pilot regional management system could be introduced. The Commission has already carried out a series of pilot regional workshops which the UK strongly supported. Those workshops brought together fishermen, administrators and scientists to discuss issues concerning particular fisheries. The feedback from the workshops was very positive and in June last year the Council agreed, in what we consider to be a welcome step, to put such workshops on a more permanent footing. They have provided the starting point from which the present recovery plans have been developed.
	However, even extremely local decisions may have wider implications, whether for the environment or for budgets. Thus the Council of Ministers needs to retain a role to monitor the decisions taken and to help ensure coherence across the European Union, while allowing for legitimate variation. We believe that the successful manner in which recent stock recovery plans have been put together demonstrates what can be achieved. We look forward to building on that in the forthcoming review.
	However, as has been pointed out by a number of noble Lords who have spoken tonight--the noble Baronesses, Lady Byford and Lady Wilcox, and my noble friend Lord Judd--a key priority is the maintenance of effective and consistent standards of enforcement across the Community. Last year, existing controls were strengthened by the implementation of satellite monitoring for vessels over 24 metres and the requirement for all vessels over 10 metres to keep log books and to record all catches and landings. We have in place more effective enforcement, but a great deal more still needs to be done to instil a culture of compliance with fair and consistent standards across Europe. I would not query that for a moment. We look to the Commission to come forward with proposals to improve levels of co-operation on enforcement between member states.
	A number of noble Lords, including my noble friend Lord Judd, noted that there are only 25 European fisheries inspectors. I am sure that this issue will be further examined during the course of the review. However, it is important to make it clear that the purpose of those inspectors is to monitor the effectiveness of national inspectorates. It is not the case that that small number is intended directly to enforce the rules on fishing fleets, although I recognise the issues as regards not having "custodes"--I apologise, I was trying to change the grammar of the Latin this late at night, but I do not think that I shall achieve it. It is important to make sure that those who are monitoring the monitors are sufficiently resourced.

The Earl of Onslow: My Lords, quis custodiet ipsos custodes?

Baroness Hayman: No, my Lords. That bit I know. I was trying to change the grammar to make it fit into the English of my sentence. Now I have lost my place completely.
	As to the important issue raised by my noble friend Lord Judd of the CFP's effect on developing nations and the way in which different policy objectives can interact, officials from MAFF, DfID and the FCO have been working closely on fisheries agreements in developing countries to ensure better coherence between EU commercial policies for fisheries and policies for eliminating poverty in developing countries. That work will continue.
	As to the aquaculture industry, a matter raised by several noble Lords, the production of farmed salmon and trout complements rather than competes with the traditional catching sector. It is becoming increasingly diverse, with interests in the farming of cod, halibut, turbot and scallops. We heard from the noble Baroness, Lady Wilcox, of the possibilities in regard to lobster.
	Sustainable development is a clear requirement for aquaculture to be successful and controls are in place to ensure that the interests of consumers, the environment and the fish are protected. This is supported by significant expenditure on research and development, including work on cultivation techniques as well as on the impact of aquaculture on the environment. It is an area where we can apply some of the lessons that we have painfully learnt from not heeding the warnings given in the past.
	My noble friend Lord Stoddart of Swindon made clear--and on this, at least, I agree with him--the importance of the European Commission taking seriously the conclusions of the report. Last year, Commissioner Fischler outlined the Commission's priorities for the review to the European Parliament. We can expect the Green Paper to cover conservation of resources, the CFP's economic and social dimension, external fisheries relations, the Mediterranean and good governance in fisheries policy. That is a wide-ranging set of topics. It broadly covers most of the issues that have been raised today.
	It is important that, both in this country and wider, we have an effective debate on the Green Paper and a successful outcome in terms of policy. Today's debate has given us the opportunity--certainly from the Government's viewpoint--to be able to take forward, with additional evidence and support, the kinds of policies that we believe are necessary to change the CFP for the future.

The Earl of Selborne: My Lords, there have been some powerful contributions to the debate from all sides of the House. We have not been in total agreement as to whether the common fisheries policy is capable of reform. But we have been in unanimous agreement that the policy is failing--in part, as a consequence of perverse subsidies.
	I shall take away from the debate particularly the ringing words of the noble Lord, Lord Judd. They will "hold" in my memory for a long time. The noble Lord said that we owe it to the fishing communities to provide leadership. That is the realisation that we have, having witnessed over the past 17 or 18 years a failing policy which is impacting so severely and unfairly on quite a small minority. We in this House owe it to those people, as do the Government, to try to make sure that the burden is not totally carried by them.
	To that extent, while I welcome the Minister's assurances, I felt that her reliance on the availability of Objective 2 areas was just a little too bland. I hope that she will reflect on that carefully. If ever there were a case for a government task force to be set up to examine specifically the inevitable impact on fishing communities, this is it.
	It merely remains for me to thank all noble Lords who have participated in the debate. It has been distressing, but it has given us some shafts of guidance as to what is implied by "leadership" in this sector.

On Question, Motion agreed to.
	House adjourned at ten minutes before ten o'clock.